Doubts arise on harbor project

Wyndham troubles may jeopardize tax break from city

June 09, 1999|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

Amid continuing financial struggles that cloud the company's future, doubts have arisen over whether Wyndham International Inc. will continue its involvement in a $117 million hotel under construction east of the Inner Harbor.

Sources familiar with the 750-room hotel said Wyndham has privately told the project's developers -- baking magnate John Paterakis Sr.'s H&S Properties Development Co. and a pair of Atlanta firms -- that it plans to cut ties to the project.

If the Dallas hotel company pulls out of its commitment to put its name on the 31-story hotel, it would jeopardize an agreement between the city and the lodging project's developers at a time when millions of dollars in economic development incentives are at stake.

Wyndham officials could not be reached for comment on whether the chain will fly its flag atop the Inner Harbor East hotel, and city officials said they are unaware of any changes in the project.

However, Michael Beatty, an H&S Properties vice president, said he expects Wyndham to continue on the project.

"They are a company that has gone through some major turmoil, but we have a deal with them and they have to perform," he said. "The hotel is being built as a Wyndham. We have a signed deal, and they have not missed any performance criteria.

"We're very comfortable with the position we're in. We're building the hotel and it will open on time."

The hotel is set to open late next year.

In December, Wyndham parent Patriot American Hospitality Inc. was forced to sell a 30 percent stake in the company for $1 billion to an investor group led by Apollo Real Estate Advisers L. P. and Thomas H. Lee Co.

As part of its deal, the pair are providing Patriot American with additional cash to help repay part of the $3.9 billion it owes against $6.6 billion worth of hotel assets.

"I just can't shed any light on it," said Don Trice, president of Stormont Trice Development Co., one of a pair of Atlanta firms developing the hotel and the company that will formally operate the project, on whether Wyndham remains involved.

A Wyndham decision to cut ties to the hotel could also send a potentially crushing setback to the project and the city's $151 million expansion to its convention center.

Without an operator, the hotel will be unable to pre-book conventions and other guests, plan its marketing strategy, tap into a nationwide reservation system or make other necessary pre-opening plans. Convention center marketing would also suffer without a name brand, industry experts say.

But perhaps just as importantly, the loss of Wyndham could nullify an agreement between H&S Properties and the city in which the Schmoke administration pledged more than $85 million in tax breaks and other incentives to the hotel.

The City Council intends to hold a hearing this evening on a bill that would grant the hotel $75 million in tax breaks over the first 25 years it is open through a "payment in lieu of taxes" (PILOT) program.

PILOTs are programs that allow developers to negotiate property taxes with governments, rather than pay the full amount as assessed by the state.

City Council Bill 1058, which would provide H&S Properties' Inner Harbor East Hotel LLC and Inner Harbor East Garage LLC with a PILOT, makes no mention of Wyndham.

An economic analysis of the project conducted earlier this month by the Baltimore Development Corp., the city's economic development agency, also makes no mention of the Wyndham chain.

Under terms of their agreement, the developers would have to receive approval for a new operator from BDC before any incentives could be authorized.

A $10 million grant that had been promised to the H&S Properties team -- contingent upon having an approved operator in place -- is set to become available July 1, the beginning of the city's next fiscal year.

"If there's been a change, the developer has yet to tell us, as per our disposition agreement," said M. J. "Jay" Brodie, BDC's president. "If that were the case, they would have to provide an adequate substitution."

Said John C. Murphy, an attorney representing community groups opposed to the hotel: "Wyndham was a very important part of this deal, because of the apparent quality of their brand. If Wyndham is gone, the city ought to look again at whether they want this to be a convention center hotel."

The potential loss of the Wyndham flag also comes as Peter G. Angelos is contemplating operators other than Hyatt Hotels Corp. for an 850-room hotel the attorney wants to build across from the convention center.

Angelos is said to be frustrated with Hyatt because talks have stalled on linking the planned Grand Hyatt with the 487-room Hyatt Regency Hotel on Light Street, sources said.

City economic development officials said they feel confident that the H&S Properties team will have little difficulty finding a competent operator and flag, even if Wyndham isn't involved.

"I don't worry about it from the city's standpoint," said Roger C. Lipitz, BDC's chairman. "Our interests are the same as theirs -- they want a four-star company running it and so do we. We would do everything we could to help them."

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