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FaulknerUSA breaks ground on new $285 million hotel

Developer FaulkerUSA on Friday broke ground on a new $285 million, 1,000-room hotel next to the Henry B. Gonzalez Convention Center in Downtown San Antonio.

New York investment group Marathon Real Estate also announced that it is the lead equity investor in the 885,000-square foot project along with Austin-based FaulknerUSA. The hotel should be complete by 2008.

Marathon Real Estate is a division of Marathon Asset Management LLC, a global investment firm with $9 billion in assets.

The balance will be financed with $208 million in revenue bonds that will include a combination of Empowerment Zone Bonds and Taxable Bonds.

The city of San Antonio will own the site. However, Hotel Investments LP -- a partnership made up of Marathon Real Estate and FaulknerUSA -- will lease the site from the city under a 75-year ground lease, with an option to extend the lease an additional 15 years. Chicago-based Hyatt Corp. will manage the property.

"San Antonio enjoys a vibrant market with great opportunities, and is one of the top 10 cities for overnight leisure travel in the U.S.," says Jon Halpern, managing director and head of the real estate group at Marathon Asset Management. "We are proud to be a part of this historic undertaking and are impressed with the city's vision and hospitality."

Halpern adds, "We work hard to leverage our developer experience and flexibility to deliver creative financing solutions for complex transactions, and we are pleased to see that this uniquely structured public/private partnership has come together after much due diligence and hard work."

The hotel will have a grand ballroom consisting of 32,700 square feet of space, a junior ballroom of 21,600 square feet of space and 62,765 square feet of adaptable space.