Creditors Buy Beleaguered Belvedere

December 28, 1990|By Edward Gunts

An article in yesterday's Business section may have given an incorrect impression of the status of businesses inside the Belvedere Hotel. The Owl Bar and John Eager Howard Room off the hotel's main lobby will close permanently Jan. 1. Shops and restaurants on the hotel's lower level and offices on the second ++ and 11th floors will remain open for business as usual, according to Charles Gueli, an agent for the hotel's receiver.

The Sun regrets the error.

The Belvedere Hotel, once the grande dame of Baltimore hotels, suffered the ultimate indignity yesterday, eliciting only a handful of bids when it went on the auction block in a foreclosure sale.

Although more than 100 people gathered inside a hotel ballroom to watch the proceedings, the Belvedere failed to attract a third-party buyer and was "bought in" for $3.5 million by a group of lenders that foreclosed on the loan held by developer Victor Frenkil's One East Chase Street Associates Limited Partnership.

FOR THE RECORD - CORRECTION

Although it still must be ratified by the Circuit Court for Baltimore City, the sale essentially ends Mr. Frenkil's 15-year tenure as owner of the Mount Vernon landmark, which opened in 1903.

As a result of the sale, all public spaces in the hotel will be closed Jan. 1, said attorney Kenneth Davies, the property's bankruptcy trustee. Fifty upper-level apartments, 46 of which are occupied, will remain open, he said.

The sale also means that the city of Baltimore, which invested $5 million in the project and was owed more than $6.6 million with accumulated interest, will not get any of its money back. Baltimore Gas and Electric Co., another "junior creditor" of One East Chase Street Associates, will not receive about $125,000 that it was owed.

The 13-story hotel and an adjoining garage technically were acquired by 12th Street Realty Corp., a holding company affiliated with Meritor Savings Bank, the Philadelphia-based bank that heads a consortium that foreclosed on the mortgage to Mr. Frenkil's group.

Meritor is expected to market the hotel privately after the sale is ratified. Arno Krumbiegel, vice president of Meritor and executive vice president of 12th Street Realty, said he will not know exactly how the bank will proceed until he has a chance to confer with his associates.

John Hentschel Jr., real estate officer for the city, attributed the lack of brisk bidding to the poor real estate climate, in which

developers have had difficulty acquiring loans for real estate projects of any kind.

"This is strictly a victim of the real estate horror that's going on," he said. "What was working against us was the deteriorating real estate market. It's difficult to purchase something if you can't get a loan."

The hotel is one of the few truly mixed-use buildings in the city, containing 180 hotel rooms, food and beverage operations, meeting and reception rooms, offices, apartments, shops and a parking garage. But it was unable to compete for a significant share of the city's hotel business because it is 10 blocks north of the Convention Center and does not enjoy the Inner Harbor location that many of Baltimore's newer hotels do.

The Belvedere received city financial assistance when William Donald Schaefer was mayor, but when Mayor Kurt L. Schmoke took office in1987, the city funds stopped. Its owners filed for protection from creditors under the U.S. Bankruptcy Code in May 1989.

The auction was set up last month after a Miami-based developer who planned to convert the hotel's upper floors to condominiums, Judah Hertz, backed out of a contract to buy them for $5.5 million.

Last week, U.S. Bankruptcy Judge James Schneider ordered Mr. Hertz to proceed with the acquisition, but he did not do so in time to meet the court-ordered deadline and was not present at the auction yesterday.

Although the auction attracted many Mount Vernon-area property owners and curiosity seekers and "enough lawyers to hold a bar association meeting," as one observer put it, there were only three registered bidders, according to representatives the auctioneer, Alex Cooper Auctioneers.

Bidding started at $3 million and went up in increments to $3.5 million. When it appeared the bidding would go no higher, auctioneer Joseph Cooper took a brief recess. Then he came back and called for more bids. When he got no response, he banged his gavel and pointed to the Meritor group as the winning bidder.

In the sale contract with Mr. Hertz, $4.5 million of the $5.5 million price would have gone to pay off the Meritor group and $1 million would have gone to the city of Baltimore. Baltimore also would have taken ownership of the hotel's food and beverage operations, which have an estimated value of $3.5 million.

Mr. Hentschel, the city's real estate officer, said the Meritor group's acquisition means Baltimore will not receive either the $1 million or any proceeds from the food and beverage operations.

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