A new hotel may rise where spice and news once reigned Original plans for skyscrapers may be altered

February 02, 1996|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

Faced with a moribund office market, the owners of two Inner Harbor skyscraper sites are considering options that could include the city's first new downtown hotel in nearly a decade.

With the $150 million Convention Center expansion nearing completion and the hotel industry's rebound, the owners of both the McCormick & Co. Inc. spice plant site on Light Street and the old News American site on Pratt Street say they may reconfigure plans for new office towers.

"I think the interest among hotel operators in our site is extremely serious," said Harvey Schulweis, president of Schulweis Realty, which controls the former News American site. "It's not what I would call casual interest."

"A hotel is one of the best uses for the McCormick site," said Robert Minutoli, a senior vice president of the Rouse Co., which has owned the McCormick site near the Convention Center since 1988. "But no one has specifically approached us recently, and, because the hotel business is so different from what we do, we wouldn't begin development of a hotel independently."

In addition to the Convention Center expansion, which is expected to significantly bolster demand for hotel rooms, downtown's sluggish office market appears to be the driving force behind the potential shift in plans.

Baltimore's office vacancy rate ranks as one of the highest in the nation, and has been fueled by planned corporate defections from downtown by USF&G Corp. and others. The problem is exacerbated by the fact that Baltimore ranks near the bottom of major U.S. cities in terms of white-collar job creation, positions that traditionally occupy office space.

Under those conditions, many local commercial real estate analysts predict that a new downtown skyscraper will be deferred for at least a decade.

"I can't foresee a time in the near future when Baltimore would need a new skyscraper," Mr. Schulweis said.

If either Schulweis or Rouse change their plans, it would mark the third time recently that the developer of a proposed skyscraper downtown has been forced to amend its plans because of the soured market.

The latest example came in July, when a local representative of Capital Guidance Corp. said the Swedish investment house was considering developing two buildings on a prime site on Light Street, rather than proceed with a planned $190 million, 45-story high-rise.

The last major hospitality property to be completed in Baltimore was the 622-room Stouffer/Renaissance Inner Harbor Hotel in 1987. Since then, various ideas have been proposed to take advantage of the Convention Center expansion.

In 1991, for instance, developer Richard A. Swirnow and partner Parkway Holdings Ltd. of Singapore proposed a 1,000-room hotel above the expanded Convention Center, but the project received a cool reception and the project has been all but scrapped.

Despite the poor office market, both Schulweis and Rouse said that any development at their sites would probably still contain various uses, similar to what Rouse incorporated into the Legg Mason Tower/Gallery at Harborplace, a 500,000-square-foot building that includes 28 stories of office space, five floors of retail and the Stouffer/Renaissance Hotel.

The precise mixture of components in the new projects may, however, change radically from their original conception.

"I think an office component will be part of any new development, just not its anchor," Mr. Schulweis said.

"Our vision for the site has always been for a large, mixed-use project," Mr. Minutoli said. "Obviously the site is at a pivotal corner, so we have a whole matrix of different opportunities."

Although both Mr. Schulweis and Mr. Minutoli declined to provide names of interested hotel operators, the three major full-service hotel companies not represented in Baltimore but believed to have an interest in locating here are Hilton Hotels Corp., Doubletree Corp. and Westin Hotels Corp. The Stouffer/Renaissance hotel chain is also considering expanding its downtown presence, sources say.

"I think several companies catering to full-service hotels would be interested if the economics were right," said Robert T. Koger, president of Molinaro Koger, a Virginia firm specializing in hotel sales. "The question is, are the economics right? I think there would have to be some city or state incentive provided to get to that point."

Additionally, any new hotel wouldn't appear overnight, however. Based on industry averages, new hotel planning and construction takes roughly three years.

In the meantime, the need for new development could diminish if construction magnate Willard Hackerman ever proceeds with approved plans to more than double the 339-room Sheraton Inner Harbor Hotel -- also a block from the Convention Center -- on a parking lot adjacent to the hotel.

Mr. Hackerman could not be reached for comment yesterday.

When originally proposed in 1989, the News American parcel at 300 E. Pratt St. was to be the site of a $155 million, 32-story office high-rise that included a smattering of retail space.

But in the wake of the real estate industry's collapse the following year, Schulweis and partners Nationale Nederlanden N.V. and the Hearst Corp. failed to secure tenants at rents required for a new building and elected to postpone the project. Today, the land serves as a 200-space parking lot.

Rouse experienced a similar setback with the old McCormick plant, which it obtained in 1988 as part of a $550 million purchase from the Hunt Valley-based manufacturer.

Originally, Rouse and partner Teachers Insurance & Annuity Association planned to develop a 1 million-square-foot project on the site at 414 Light St. beginning in 1990 or 1991.

When the local market crashed because of overbuilding and economic recession, however, Rouse received city approval to build a 240-space parking lot, the land's current use.

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