It has been about two years since a Ritz-Carlton was proposed on prime Baltimore Harbor-front land, and months since the developer said a final deal was near. But a deadline looms next week for the $156 million luxury hotel and condominium project.
Developers have been publicly pitching the Ritz to the region's upper crust, promoting lavish amenities for guests and residents and pledging a fall groundbreaking. But behind the scenes, they have been working to close a complicated legal and financial deal to buy the land before a guaranteed price expires at the end of the month.
"Our legal counsel is diligently working on finalizing the financing of this project," Edward V. Giannasca II, president and chief executive officer of L.I. Square Corp., the project's developer, said in a statement.
"Because of the nation's tragedy in New York City and Washington, D.C., developers from around the country are just beginning to feel the ripple effect and the consequences it will have on our economy," Giannasca said, referring to the Sept. 11 terrorist attacks. "We remain positive and very excited about the future of the Ritz-Carlton Inner Harbor, Baltimore, and the role it will play in the future of our great city."
L.I. Square has been working to buy about 5.6 acres on Key Highway that was last home to a Bethlehem Steel propeller yard.
Analysts said the project might be facing delays because financing has been extremely difficult to obtain for hotels, which were in a slump even before the terrorist attacks in New York and Washington.
"Prior to Monday [Sept. 10], the financing arena for hotels was tough. After Tuesday [Sept. 11], it was almost nonexistent," said Rod Petrik, a managing director and hotel expert at Legg Mason Wood Walker Inc. "It comes down to if the Ritz developers had a [financing] deal or not. If they did not have one, I don't expect they'll get one until early next year."
Petrik said the specific fallout from the attacks will not be known for some time. Developers, lenders and hotel chains have not announced that any hotels in the development pipeline have been officially postponed.
The Ritz developers declined to be interviewed yesterday about the project. But based on information provided in recent months, L.I. Square will have to buy the land by the end of the month or possibly face new negotiations over its price, which could jeopardize any financing deal by inflating the cost of the project - already substantially higher than when it was proposed.
The land is controlled by the former developer of the site, a Florida businessman forced out of the project more than a year ago after revelations surfaced about his past. L.I. Square Corp. planned to buy the land and pay all of those with a stake in it at the same time.
Stuart C. "Neil" Fisher, the businessman, is expecting to collect a multimillion-dollar fee for relinquishing his rights to the property upon its sale. He has said recently that he supports the deal.
Other parties involved also said they have signed onto the Ritz.
The neighbors and the city support the project and the developer, despite a relationship damaged when they learned that Fisher had been accused of fraud in other land deals. City agencies have approved the design, awarded permits, backed property tax breaks and are even reviewing a plea to change the street name to Francis Scott Key Boulevard.
A spokesman for the Johns Hopkins University, which owns a portion of the land, said it is actively seeking to sell. The other owners negotiating to sell are Philadelphia-based venture capital firm Lubert-Adler and Richard Swirnow, president of HarborView Properties Development Co., which is developing a housing community next door.
In addition to local support, one expert said the project may have something else going for it: It may have an easier time obtaining financing because it is also a housing project.
Before the attacks, Ritz-Carlton projects were having greater success in finding lenders because they have included condos. The cash raised from condo sales helps pay for the cost of the hotel, which must be booked each night, said Warren Marr, director of Hospitality and Leisure Consulting at PricewaterhouseCoopers.
The Baltimore Ritz will likely be required to sell a certain number of units before proceeding with the construction, Marr said. The Ritz has announced that it has collected deposits for more half of the 97 units, although none have actually been sold.
"The ability to sell condos frees up cash for development and makes the per-room cost on the hotel less and the financing more obtainable," he said. "But many of the financing institutions are in New York and really just trying to relocate and get their files in order after the events of last week."
The owner of the Baltimore Ritz's development company and primary financier, Philip Pilevsky, is based in New York.
None of the other investors have been identified.