The sale of the Belvedere, a midtown landmark, to Miami developer Judah Hertz has hit a financial snag that probably will cause the developer to miss his Friday settlement date.
John J. Hentschel Jr., chief real estate officer for Baltimore, says Hertz is having difficulty obtaining a second loan to help him pay the hotel's $5.54 million purchase price.
Hentschel says it is unlikely that Hertz will be able to go to settlement Friday, but he says he is still optimistic that the deal ultimately will go through.
"Everyone involved is trying to figure out what is necessary to put the whole project back on track," Hentschel says.
As collateral to get a loan from a second lender, Hertz put up a mortgage he holds on a project in Miami. But, the lender is wary of the collateral because of a downward trend in some sectors of Miami's real estate market, Hentschel says.
Hentschel says he does not know what kind of property Hertz wanted to use as collateral.
Hertz and his first lender for the Belvedere sale, Home Savings Bank of Homestead, Fla., have been trying to work out an alternative plan for him to borrow the money he needs, Hentschel says.
"It's not unusual to hear these days that developers are having troubles geting the loans necessary to close deals because of the poor real estate market all over the country," Hentschel says.
Hertz has said he would spend $900,000 on improvements for the Belvedere. His plans call for converting the hotel rooms into 125 condominiums selling at prices from $59,000 to $110,000.
The hotel was purchased in 1975 by Victor Frenkil's One East Chase Street Associates Limited Partnership. Hertz stepped forward to buy the hotel after the partnership filed for bankruptcy last year.
Frenkil, a local businessman and developer, purchased the hotel for $650,000. In 1975, he received $4.5 million in city-backed loan guarantees to convert the building to apartments. Then, four years later, the city decided it needed more hotel rooms to lure big conventions and granted Frenkil a $3 million direct loan to convert the apartments back into hotel rooms.
The loans and loan guarantees were granted during the administration of then-Mayor William Donald Schaefer. When Frenkil bought the hotel, it was vacant and deteriorating. The city approved the $4.5 million in loan guarantees to get the building back on the tax rolls.
The partnership filed for bankruptcy after the current mayor, Kurt L. Schmoke, refused to pump any more city money into the hotel. U.S. Bankruptcy Judge James F. Schneider approved the sale of the Belvedere to Hertz Oct. 4, after the city's Board of Estimates approved the deal.
According to Schneider's approval order, Hertz is to buy the hotel for $5.54 million.
Meritor Savings Bank, one of the major creditors, will receive $4.5 million if the sale is closed by Friday. The judge's order says Meritor would receive $5 million if settlement comes after Friday but before Dec. 31.
The city would receive $1 million from the sale and would gain control of the building's food and beverage space, which it wants as a home for the Culinary Arts Institute. Hertz would have the option of buying that space from the city for $3.5 million within two years after the settlement, the court order says.
As part of the hotel deal, Hertz would not be responsible for back real estate taxes that the Belvedere owes the city.