2 hotels might be better than 1 Compromise could put buildings downtown, at Inner Harbor East

March 01, 1997|By Gary Gately and JoAnna Daemmrich | Gary Gately and JoAnna Daemmrich,SUN STAFF Sun staff writer Kevin L. McQuaid contributed to this article.

Amid doubts over his choice of a megahotel site, Mayor Kurt L. Schmoke is considering a compromise that would instead bring an 800-room Westin to the heart of downtown and a 300-suite hotel to the east banks of the Inner Harbor.

The compromise has been the subject of private negotiations this week between John Paterakis Sr., Baltimore baking mogul and owner of the Inner Harbor East site, and Harvey Schulweis, who wants to build a 44-story Westin on the old News American site his New York company controls.

The arrangement would allow the mayor to reconcile two goals: to establish the long-sought "convention headquarters" hotel and to create jobs in Inner Harbor East, part of the empowerment zone, a $100 million federal undertaking to revitalize poor neighborhoods.

Schmoke's willingness to reconsider the Westin comes less than a week after he surprised business leaders here and in the nation's convention industry by favoring the politically connected Paterakis' bid to build a 27-story, 900-room hotel complex a mile from the newly expanded convention center.

The mayor would not comment on specifics. But administration insiders said building two hotels at once would be a "win-win for the city," as long as it did not require substantially more government subsidy.

Each developer had sought a combination of city, state and possibly federal subsidies totaling $30 million to $40 million, in packages that could include tax breaks, grants and loans.

"I'm aware of these discussions, and I know that all the developers who made proposals on hotels are still very interested in Baltimore," Schmoke said.

Those close to the mayor say his support for such a deal would depend on how much it benefits the empowerment zone, the level of minority participation and whether a smaller hotel at Inner Harbor East is likely to drive waterfront development beyond downtown.

"If the private sector perceives this as something that works for them, and they're not collectively asking the city for more money, then we'd have to take a serious look at it," said Daniel P. Henson III, the city housing chief and a board member of the

Baltimore Development Corp.

Building the Westin -- the only one of three megahotel proposals with both a site controlled by the developer and a sure operator -- would also require one major addition to satisfy the mayor: a 400-space underground parking garage, in addition to the 200 spaces included in the original Schulweis proposal. How much that might increase the $173 million cost -- and who would foot the bill -- remains unclear.

Neither Schulweis nor Paterakis would comment yesterday.

A guaranteed sweetener

A compromise almost certainly would include a sweetener for Paterakis in the form of guaranteed income from blocks of rooms reserved by the Johns Hopkins University and Morgan State University, sources said.

Both universities have demonstrated interest in developing a meeting center by the waterfront.

Last week, the BDC board recommended Paterakis' $112.2 million proposal to build a 750-room hotel at the water's edge off President Street and a 150-suite hotel along Aliceanna Street.

After the BDC board selected the Paterakis proposal, Schulweis went to the mayor and asked him to consider a compromise. He offered to guarantee to hire city residents, especially those living in the economically depressed areas of the empowerment zone, to satisfy the mayor's desire to create jobs for a city that has been steadily losing them.

The mayor told Schulweis to talk to Paterakis, and if the two reached an agreement, he would give it serious consideration, administration insiders said.

The latest twist in selecting which hotel or hotels should receive potentially tens of millions in government subsidy came as the city released two long-awaited studies on downtown hotel needs.

In its studies, kept secret for more than three months by the BDC, Legg Mason Realty Group Inc. concluded that Baltimore needs a 1,000-room four-star hotel to remain competitive in the $83 billion-a-year meetings industry.

Legg Mason said Baltimore, with about 6,000 hotel rooms and an occupancy rate exceeding 70 percent, could sustain about 1,200 additional hotel rooms between now and 2000, the earliest likely completion date of any megahotels.

Legg Mason said the best site for a new hotel would be the one closest to the convention center, nearing completion of its $151 million expansion and renovation: a city-owned parking lot just north of Oriole Park.

Ranked next was the former McCormick & Co. headquarters at Light and Conway streets, the prime real estate owned by the Columbia-based Rouse Co.

Schulweis' site, at South and Lombard streets about four blocks from the convention center, ranked third but was the only of the three to be proposed. Paterakis' site is a mile away from the convention center.

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