Baltimore-area hotels becoming hot properties

July 28, 1995|By Kevin L. McQuaid | Kevin L. McQuaid,Sun Staff Writer

Bolstered by improving occupancy and room rates and a lack of new construction, investors are expressing renewed interest in Baltimore-area hotels after a five-year lag.

Demand has risen so high that owners of hotels such as the 12-story Latham Hotel downtown are beginning to consider selling.

"We've received offers for that property ever since we bought it," said Paul W. Whetsell, president and chief executive of CapStar Hotels Inc., the Washington, D.C., investment firm that bought the former Peabody Court Hotel for $3.1 million in 1992. "And the partners are for the first time looking seriously at the offers coming in."

Mr. Whetsell, whose company owns 45 hotels nationwide containing 7,000 rooms, added that it will be weeks before the various offers on the 103-room Latham -- which also contains the prestigious Citronelle restaurant -- are fully evaluated.

Although one of the offers for the 612 Cathedral St. hotel is believed to have come from Host Marriott Corp., which owns 100 lodging properties, a spokesman for the Bethesda-based company denied that it is pursuing the Latham.

CapStar's decision to entertain offers dovetails with increases in hotel occupancy and room rates, according to Smith Travel Research, a Tennessee firm that compiles industry statistics.

As of May 31, Baltimore-area hotels had an average occupancy of 64.7 percent, a four percent gain from the same period a year ago.

Rates gained at the same pace, to an average $67.79 per room.

As a result, several notable Baltimore lodging properties have changed hands in recent months.

Late last month, the owner of the Tennessee-based Davidson Hotel Corp. bought the 392-room Marriott Hunt Valley Inn for roughly $12.3 million.

That transaction was followed Wednesday when Aldrich, Eastman & Walch (AEW), a Boston-based pension fund adviser with $5 billion in assets under management, bought the 251-room Guest Quarters Suites Hotel near the Baltimore-Washington International Airport.

AEW, which bought the Guest Quarters and a similarly sized hotel in Troy, Mich., as part of a $38 million package from Beacon Hotel Corp., owns about 100 hospitality projects nationwide. Doubletree Corp. will continue to manage the Linthicum hotel, said Martha Thurber, an AEW senior vice president.

But the surge in investor interest is hardly a local phenomenon. Last November, CapStar formed a partnership with Texas billionaire Robert M. Bass and others to acquire $250 million worth of hotels nationwide.

Thus far, Mr. Whetsell said, the Equistar Hotel Investor group has spent roughly $50 million.

"Hotel demand continues to increase steadily, the economy is fairly stable, and there's a significant lack of new supply entering the marketplace," Mr. Whetsell said. "The basic industry fundamentals are going in our favor."

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