Baltimore stands to lose its entire $4.5 million investment in the Belvedere Hotel if it is unable to resurrect a deal to sell the landmark to a Florida developer.
Judah Hertz, the developer who planned to buy the Belvedere, has "walked away" from his agreement to buy it for $5.5 million, Kenneth F. Davies, a trustee appointed to oversee the hotel's operation, said yesterday.
If the sale to Hertz had gone through, the city would have recouped $1 million and taken control of the Belvedere's restaurants and ballrooms, which city officials said are worth at least $3.5 million.
The remaining $4.5 million from Hertz would have gone to Meritor Bank, which holds a first mortgage on the hotel, at Charles and Chase streets.
While Davies said flatly that the sale to Hertz is dead, city real estate officer John J. Hentschel Jr. said there is still hope for an agreement.
"We're still talking," Hentschel said. "But, obviously, there are problems."
Hertz last week missed a settlement date for the deal, prompting Meritor to ask a judge for permission to take charge of the hotel until a foreclosure sale can be scheduled. That request was granted this week in Baltimore Circuit Court, and a foreclosure auction tentatively has been scheduled Dec. 27, Davies said. He said all reservations at the Belvedere for dates up to Jan. 1 would be honored.
If Hertz does not follow through on his "unconditional" agreement to purchase the hotel, he could face legal action from Davies and the city, Hentschel said. He also faces the loss of a $200,000 down payment he made with Meritor.
"I talked to Judah two days ago, and he was still seeking through intermediaries to negotiate with Meritor," Hentschel said.
Hertz's problems with the deal began when he was unable to obtain a second loan he needed to pay the hotel's $5.5 million purchase price. Subsequently, he has been attempting to work with the city and Meritor to soften some of the financial terms but, thus far, Meritor has balked.
If the Belvedere proceeds to a foreclosure sale, it would most likely cause the city to lose its entire Belvedere investment. The city holds a second mortgage on the property, and in the event of a sale, Meritor would be ahead of the city to collect on its $4.5 million first mortgage.
"It's obvious that a foreclosure sale is not going to generate as much as the sale [would] provide," Davis said.
When Hertz agreed to buy the Belvedere, he said he would spend $900,000 on improvements, then convert the building into 125 condominiums priced at $59,000 to $110,000.
The historic Belvedere, once considered the finest hotel in Baltimore, was vacant and deteriorating when it was purchased by a partnership led by builder Victor Frenkil in 1975. After the purchase, Frenkil received millions in direct loans and loan guarantees from the city under then-Mayor William Donald Schaefer.