Paterakis plans a Four Seasons at Inner Harbor East

`Urban resort' hotel to cost $100 million, challenge nearby Ritz

July 26, 2002|By Meredith Cohn | Meredith Cohn,SUN STAFF

Bakery magnate John Paterakis Sr. intends to construct a $100 million Four Seasons "urban resort" hotel in the Inner Harbor, going against a sour economy and a rival proposal for a Ritz-Carlton across the water.

The 200-room hotel - planned on a 2-acre parking lot in Inner Harbor East - will include condominiums and rental units where the well-to-do can share in the luxuries offered by the five-star chain, according to Michael S. Beatty, head of Paterakis' H&S Properties Development Corp.

"They've been in the city for a long time looking for a site," Beatty said of Toronto-based Four Seasons officials. "We have a written agreement to move forward this fall with development. ... John Paterakis decided a luxury hotel was not going to get done unless we do it, so we'll do it."

Beatty said construction could start in a year and take about 18 months to complete. Through H&S, Paterakis plans to put up $35 million of the cost.

The Four Seasons would be H&S' third hotel in Inner Harbor East. The 750-room Baltimore Marriott Waterfront hotel opened in February 2001, and the 205-room Courtyard by Marriott two months earlier.

H&S expects eventually to have 1,500 hotel rooms in its multiblock enclave in Inner Harbor East, abutting Paterakis' bakery and distribution center. H&S plans offices, apartments and shops in the coming year; it expects to build a Homewood Suites extended-stay hotel and another limited service hotel on the former Allied Signal site.

In addition to the two existing hotels, H&S had once discussed developing another Marriott brand: Ritz-Carlton. But after Ritz-Carlton signed on with developers for a site on Key Highway across the harbor, Beatty began shopping around for another top-of-the-line flag.

A Ritz hotel and condominium project is planned at the foot of Federal Hill by Giannasca Development Companies LLC. No groundbreaking date has been set but, after three years of work, the developer said he has financing lined up.

Beatty wished that project well but said he did not believe the Ritz project would be built because of the jittery economy. He gave his project better chances because of Paterakis' track record and deep pockets.

Rod Petrik, a managing director at Legg Mason Wood Walker Inc. who follows the hotel industry, said he was not sure Baltimore could handle two top-tier hotels.

"If [H&S] starts construction, it's going to be more difficult to do the Ritz," he said. "Certainly with Mr. Paterakis, the likelihood of getting financing is increased. The city is probably capable of supporting one, and I'm not sure if two isn't a stretch."

Petrik said Paterakis' willingness to fund $35 million, half the cost of the hotel portion of the project, will vastly improve his chances of finding lenders for the rest. He agreed that H&S' development record will also help his chances.

Paterakis began building the $154 million Baltimore Marriott Waterfront hotel and garage without committed lenders, although the project won the city's backing as a convention headquarters hotel. Since the opening, it has attracted lenders and investors, who bought a 71 percent stake in the project.

But times have changed. The economy floundered and travel slowed - virtually stopping for a time after the terrorist attacks. Upscale chains such as Ritz and Four Seasons have been hit the hardest.

Beatty said the Marriott and Courtyard currently have occupancy rates of at least 70 percent.

Petrik said that though the market is improving, lenders have been slow to return to the hotel arena.

"If he's not starting construction until a year from now, the market is hopefully improved at that point," he said.

"It will be the strong brands that get the dollars first. Then they'll look at who the builders are. They don't want to be spinning their wheels with people who don't have the wherewithal to get it done."

Beatty said he was not certain H&S would seek public money for the project. M.J. "Jay" Brodie, president of the Baltimore Development Corp., which negotiates the subsidies, said he would consider any request once it's made. Things haven't gotten that far, he said.

"It's a great vote of confidence that the conversations have moved to more conversations to expressing definite interest," said Brodie of the meetings with the Four Seasons.

He said the Ritz is interested, too. And he thought there was room in the city for both hotels.

"This is a competitive society," Brodie said, "and before anyone gets a shovel in the ground they'll do their due diligence, and they'll ask the Ritz question."

Beatty said details such as ownership are still being worked out, although he said H&S will likely own 80 percent and the Four Seasons might own a small stake.

The Four Seasons typically manages and does not own its hotels. It owns or has a small stake in some of its 55 properties in 25 countries. And like Ritz, the company recently has been including apartments in its hotel projects.

The chain has opened two hotels this year and has 20 in development, according to its Web site. No one at the company could be reached for comment.

Four Seasons, as most hotel companies, reported that profits are down this year. In the first quarter, it reported earnings decreased to $7.7 million from $17 million in last year's January-March quarter, typically the industry's slowest three-month period.

Beatty said Four Seasons is just recently building in second-tier cities. He said the hotel will benefit the formerly industrial Inner Harbor East and Baltimore.

"All the rooms will have waterfront views and make you feel like you're at a resort," he said. "It will do a lot for the city. It'll give it a luxury stamp."

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