This document summarizes the development, design, financing, and impact of the 21c Museum Hotel in Louisville, Kentucky. It describes how the project revitalized downtown Louisville by converting historic warehouses into a boutique hotel focused on contemporary art. The financing was challenging, relying on public-private partnerships and various tax credits. Since opening in 2006, the 21c Hotel has seen significant growth in occupancy and rates, outperforming competitors. The success has led to expansions in Cincinnati and Bentonville with similar financing strategies using incentives, tax credits, and bank loans. Overcoming financing challenges remains important for new projects.

1. DEBORAH BERKE & PARTNERS ARCHITECTS LLP
220 Fifth Avenue
New York NY 10001
phone 212 229 9211
fax 212 989 3347
www.dberke.com
Development, Design and Financing Strategies for
Urban Revitalization Using Hospitality and the Arts
21c Museum Hotel and Downtown Louisville
ULI
26 October 2011

2. LOUISVILLE:
Nineteenth Museum
Century Hotel
Warehouses

3. The Architectural Story

4. 1979

5. 1979

6. 1995

7. 08 October 2004

38. The 21c Financing and Financial Story

39. The 21c Financing and Financial Story
2001
Laura Lee Brown and Steve Wilson want to help revitalize Downtown Louisville by
developing a project that exposes people more regularly and conveniently to
contemporary art.
2001 – 2006
Most of Louisville thinks Steve and Laura Lee are crazy for trying to build a
boutique hotel in Louisville focused on contemporary art.
2004
Banks wholeheartedly agree with this sentiment, but we still create a public /
private financing partnership that permits 21c to become a reality.
2006
21c opens

40. Significant Occupancy Growth

41. Market Leading Rates (by a huge margin)

42. Expanding Lead Over Competition
Notes:
1. RevPAR = Revenue Per Available Room
2. RevPAR Index of 150 means that 21c’s RevPAR is 50% higher than that of its Competitive Set of local
hotels. Or, in other words, 21c is generating 50% more money per room, per night than its competition.

43. 2011 YTD Through September
Smith Travel Research, Inc.

44. guest satisfaction
2010 Survey Data
21c Museum Hotel 2011 YTD: 95.35

45. awards

46. cincinnati
- construction started May 2011
- opens October 2012
- 156 rooms
- $50 million (significant local, state & federal incentives)

47. bentonville
- site work has started
- opens January 2013
- 103 rooms
- $30 million

48. The financing challenges of
the early 2000s are very similar
to the challenges today

49. Challenges of Financing Projects Today
Bank loans for new construction are extremely difficult to find
- Personal guarantees and other collateral are almost a given
- Many banks won’t even consider a hotel loan for ambiguous regulatory or
industry reasons
City and state governments want to help, but have tight budgets
Federal Government programs:
- Are at constant risk of extinction
- Have enormous transaction closing costs
- Are less valuable today
These challenges will likely remain for the foreseeable future (the ‘new normal’)

50. Overview of Financing Structure
Category of Incentive 21c Louisville 21c Cincinnati
(closed December 2004) (closed October 2011)
City Grant for Museum $1,700,000 $2,500,000
City Property Tax TIF $3,800,000
State Sales Tax Refund $3,000,000
Federal Historic and
New Markets Tax Credits $6,800,000 $11,600,000
State Historic Tax Credits $1,000,000 $6,000,000
Bank Loan(s) $11,000,000 $20,000,000
Subordinated Loan $6,000,000
Owner Equity

51. Cincinnati Financing

52. Opportunities Today
Favorable construction pricing
- New construction vs. rehabilitation
Hotel market is picking back up
Very few other new projects
Competition may have neglected upkeep
Public sector looking to help jump start construction projects
- Full-service hotels create many new jobs
Public sector likes unique and new
- Unfortunately, financiers like ‘the familiar’
- Line up public incentives first
At the end of the day, it’s all about people…
Excitement, hard work, creativity, and a solid plan are the foundations for success

53. Architectural Record
Condé Nast Traveler
Details
Esquire
Food & Wine
Garden Design
Interior World
Metropolitan Home
National Geographic
The New York Times
Travel + Leisure
USA Today
Vanity Fair
The Wall Street Journal
Wallpaper*