Paterakis acquires Harbor Inn Move seen protecting his investment in Inner Harbor East

$12 million sale price

Purchase prevents foreclosure auction of troubled Pier 5 hotel

Lodging industry

September 19, 1998|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

Hoping to protect his investment in a planned $350 million commercial development east of the Inner Harbor, local baking magnate John Paterakis Sr. has acquired the troubled Harbor Inn at Pier 5 hotel.

Paterakis' H & S Properties Development Corp. bought the downtown hotel late Thursday for $12 million. The purchase avoided a foreclosure auction scheduled yesterday by a Paterakis-controlled group that had acquired the debt on the 65-room waterfront hotel from a New York lender.

"The main motivation here was, he really didn't want to see the project shut down," said Michael Beatty, an H & S Properties vice president. "There are a lot of jobs here and it connects the Inner Harbor East project to the city."

Beatty said the new owner has not yet decided whether the hotel will carry the brand name of a national chain, but he said one change is already being implemented: Room rates that had ranged from $200 per night to $1,500 per night will be "immediately" reduced.

Room rates will range from roughly $100 per night to $300 per night. Oceanic Hotels International Inc. will continue to operate and manage the hotel, which underwent a $12 million renovation before it opened last October.

"I believe the sellers are happy that the hotel was sold to this particular entity, because it means that it preserves the location as a hotel and ensures its success," said Robert Schulman, an attorney representing the former owners, a partnership led by Michael W. Lasky and Otis Warren Jr.

The hotel ran into turbulence after Lasky's Inphomation Communications Inc. filed for bankruptcy in February, listing liabilities of more than $11 million.

Paterakis, co-owner of H & S Bakery Inc., bought the $9 million in debt on the lodging project at 711 Eastern Ave. several months ago.

The city also is owed $2 million on the hotel and annual ground rents of $120,000.

Lasky and Warren paid $5.5 million to acquire the hotel from the city in 1995.

Paterakis' purchase comes as no less than four hotels are being planned for the area immediately surrounding Pier 5, including a Wyndham, Westin, Courtyard by Marriott and a 278-room project being designed for the Baltimore City Community College site at 500 E. Pratt St.

Paterakis will be involved with two of the new hotels. He has an ownership stake in the Wyndham and is selling the land on which the Courtyard will be built.

But even with the new rooms scheduled to come on line, Beatty believes the Harbor Inn can be successful and that it won't compete with the new projects.

"This hotel is a reality," Beatty said. "We want to run it as a phenomenal operation. What happened here in the past will be very different from how it's operated in the future."

Even with the ownership change, the Harbor Inn still faces significant challenges. While downtown Baltimore hotel rooms are about 70 percent to 75 percent occupied this time of year, the Harbor Inn's average occupancy has been just 50 percent.

The project also suffers from its location, tucked behind the Columbus Center without an entrance on East Pratt Street.

"That hotel can certainly be successful with the right operator, the right strategy and the right marketing," said Rob Koger, president of Molinaro Koger Inc., a Virginia real estate brokerage firm specializing in hotels.

Pub Date: 9/19/98

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