Society Hill Hotel on Biddle files for Chapter 11

January 14, 1993|By Michael Dresser | Michael Dresser,Staff Writer

The Society Hill Hotel on West Biddle Street has filed for Chapter 11 bankruptcy protection, citing the city's stalled revitalization of midtown as one of the reasons for its financial problems.

The 15-room hotel, the first of several small bed-and-breakfast inns that opened in renovated Baltimore buildings during the 1980s, remains open while it attempts to reach an agreement with its creditors to restructure its debt, said Society Hill's owner, Thomas J. Kleinman of Philadelphia.

Mr. Kleinman said yesterday that there would be no layoffs or cut backs in operations.

Lawrence Yumkas, Mr. Kleinman's attorney, said last week's filing by Society Hill Associates Hotel Inc. and Society Hill Associates Limited Partnership does not involve the business' two sister properties -- the Society Hill Hotel-Hopkins at 3404 St. Paul St. in Baltimore and the Society Hill Hotel in Philadelphia.

The filing listed $50,000 in assets and $1.95 million in liabilities, but Mr. Yumkas said the liability figure was misleading because both the limited partnership and the operating company listed the business' $900,000 in mortgage debt.

Society Hill's primary creditors are Baltimore's Fire and Police Employees Retirement Fund and the federal Small Business Administration. Mr. Yumkas said the retirement fund was fully secured and would likely receive full repayment if the property went to foreclosure. However, the SBA would not recoup its full losses, he said.

The lawyer said Society Hill was holding discussions with its lenders and that no foreclosure actions were in motion at the time of the filing.

The hotel occupies the 161-year-old former home of Maj. Thomas Biddle, a prominent Union officer during the Civil War. The

property had been an apartment building before Mr. Kleinman bought it in 1983, renovated it and reopened it in 1984.

Mr. Yumkas said the hotel was "actually a pretty good business" but that it was saddled with heavy debt.

"It is a victim of the financing of the mid- to late-'80s, and it needs to be restructured to meet the needs of the '90s," he said.

The attorney said the hotel's restaurant, Grille 58, had been hurt by the recession, lagging convention business and poor traffic in the neighborhood, which sits on the northwest fringe of downtown, across from Meyerhoff Hall and near the Lyric Opera House.

"That was part of the city that was supposed to be revitalized," Mr. Yumkas said. "The revitalization has at the very least been stalled."

He said the restaurant operates at capacity on nights when there are performances at the Meyerhoff and the Lyric, but that traffic falls off on other nights. The attorney said hotel occupancy was running at a healthier level than the restaurant.

The restaurant's business was also severely hurt by a 22-week-long strike by the Baltimore Symphony Orchestra's musicians in 1989- 1990, Mr. Kleinman said.

Mr. Kleinman said he was originally lured to Baltimore by then-Mayor William Donald Schaefer, who became interested in urban bed-and-breakfast inns during a visit to Savannah, Ga., in the early 1980s. Soon after, when the mayor visited the Society Hill Hotel in Philadelphia, he "fell in love with it" and encouraged Mr. Kleinman to come to Baltimore, the hotel owner said.

"Schaefer was really a wizard at what he was doing with the city," Mr. Kleinman said. "Basically when he left everything started to unwind." He cited increases in the city's hotel tax and cutbacks in its tourism promotion staff.

Society Hill's relations with the Schmoke administration have been strained by a dispute over the Inn at Government House, a city-owned hotel and conference center at 1125 N. Calvert St., which Society Hill managed until 1991. After that association ended, the company sued the city for breach of contract but lost, Mr. Kleinman said, adding that the case was under appeal.

Besides its debt problems, the Biddle Street hotel has also had two tax liens filed against it by the Internal Revenue Service -- one for $18,282 in November 1991 and a second for $20,193 last July. Mr. Yumkas said those tax liabilities were in dispute and that the business was negotiating with the IRS. "Those will be resolved. That's easy," he said.

Mr. Yumkas said it was important that Society Hill survive because it offers an alternative to the "cookie-cutter" hotels of downtown.

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