Talks fail on closer location for hotel Paterakis will build complex a mile from convention center

March 06, 1997|By Gary Gately and JoAnna Daemmrich | Gary Gately and JoAnna Daemmrich,SUN STAFF

An attempt to let two competing developers resolve the thorny issue of where to build Baltimore's biggest hotel has collapsed, leaving the city to proceed with its first choice -- a 27-story, 900-room complex on the east bank of the harbor.

New York developer Harvey Schulweis, who lost out to politically connected baking mogul John Paterakis Sr. in the bid to build a publicly subsidized hotel, had been trying to work out TC compromise with Paterakis. The private talks, which had the mayor's blessing, would have led to construction of a Westin hotel in the heart of downtown, as well as a 300-suite hotel at Inner Harbor East.

City Hall sources confirmed last night that the negotiations had fallen apart less than a week after they began.

Schulweis, whose New York company controls the former News American site, expressed disappointment but clung to the hope that the city still could be persuaded to move ahead with an 800-room Westin hotel.

"I think it would have been a very appropriate solution, but Mr. Paterakis obviously didn't agree," Schulweis said.

Mayor Kurt L. Schmoke declined to comment. He had liked the idea of a compromise because it would have allowed him to reconcile two divergent 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.

The mayor "would have liked nothing better than to have two cranes high up in the air at the harbor," said one official close to the mayor.

Two weeks ago, Schmoke surprised business leaders here and elsewhere by backing Paterakis' proposal to build a 750-room hotel at the water's edge off President Street and a 150-suite hotel along Aliceanna Street.

The city will now formally grant exclusive development rights to Paterakis, whose project is expected to cost more than $112 million.

Those who book conventions in the intensely competitive $83 billion meetings industry have said the Paterakis hotel, a mile from the newly expanded Baltimore Convention Center, would be too far to serve as the "headquarters hotel" deemed essential for large gatherings.

But Schmoke has defended the Inner Harbor East site, saying it easily surpassed competing proposals from Schulweis and the Baltimore-based Cordish Co. in terms of its economic impact and its potential to drive waterfront development beyond downtown.

Compromise sought

In late February, the Baltimore Development Corp., the city's economic development agency, selected the Paterakis project over the two competitors. Schulweis went to the mayor to try to salvage the Westin project through a compromise with Paterakis. The mayor said an agreement would depend on hiring city residents, especially those from the empowerment zone, and an expensive addition to the $173 million project -- a 400-space underground parking garage.

Paterakis' willingness to discuss a compromise depended on a sweetener in the form of guaranteed income from blocks of rooms reserved by the Johns Hopkins University and Morgan State University. Both universities have expressed interest in locating new programs and a meeting center by the waterfront.

By yesterday, administration sources said, the mayor had been advised that the guarantees were off the table, and talks had stopped.

Paterakis is seeking a combination of city, state and possibly federal subsidies totaling about $40 million in packages that would include tax breaks, grants and loans. The other two developers had sought about the same amount of government assistance, and Schmoke had made clear that he would not support any compromise that would cost more.

Schmoke and members of the BDC governing board have touted another benefit of the Inner Harbor East hotel: Paterakis' partnership with Stormont Trice Corp., an Atlanta-based developer that has teamed with Herman J. Russell, owner of the largest black-owned construction firm in the nation. Schmoke said he made clear that he wanted minority participation in any huge government-backed hotel project.

Closer site advised

A consultant hired by the BDC to study Baltimore's needs for a flagship hotel concluded that the city required a 1,000-room, four-star hotel to remain competitive in the conventions industry.

Legg Mason Realty said the best site for a new hotel would be a city-owned parking lot close to the convention center, which is nearing completion of its $151 million expansion and renovation. Ranked next was the former McCormick & Co. headquarters at Light and Conway streets.

But no developer made a bid for the city lot, nor did the Columbia-based Rouse Co., which owns the McCormick site, to the chagrin of the mayor and downtown boosters.

Pub Date: 3/06/97

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