Deal near to build an Embassy Suites at Light, Redwood

A hotel would again stand where Southern long did

October 03, 2002|By Meredith Cohn | Meredith Cohn,SUN STAFF

For an enthusiastic time in the 1980s, the site of the old Southern Hotel was going to become a trophy office tower for downtown Baltimore. In a more sober moment this year, it looked as though it would become a parking lot.

But the central business district's most prominent dirt pit, which has drawn the ire of business and government leaders, may finally overcome its economic troubles. Developer J. Joseph Clarke says he's close to a deal to build an Embassy Suites hotel, parking garage and shops at Light and Redwood streets.

Clarke plans to present his $55 million-$60 million vision to the city's design panel today, an important step in the process of approvals he needs to begin work. Hilton Hotels Corp. and FelCor Lodging Trust, a Dallas-based hotel owner, say they're in final negotiations to buy the hotel.

"We've been baby-sitting this project for quite a long time," said Clarke, president of J.J. Clarke Enterprises Inc. Clarke still has some obstacles to overcome, and several factors could derail the project as they have others around the city. Clarke has not come to a final agreement on a sale price with FelCor and Hilton, which will manage the 311-room hotel. Once that is done, he can seek a lender to construct the project.

Clarke said he is negotiating with a local company to buy the 411-space garage. Clarke's company and partner Capital Guidance of Washington, which has invested about $20 million in the development, will end up owning only the 15,000-square-foot retail portion. Construction should take about two years.

Between 1987 and 1988, Trammell Crow Co. bought a half-dozen buildings on the block for an office skyscraper, but there was little demand. Trammell Crow, hurting from the real estate crash of the late 1980s, turned the project over to Clarke. He began clearing the site, which sits fenced and empty, in 1999.

Clarke plans to build around the one building owner that didn't sell to Trammell Crow - McDonald's Corp. Peter Fillat Architects incorporated the fast-food company's historic Thomas Building into the rendering that is to be presented today to the city's Design Advisory Panel.

FelCor, which owns hotels under brands such as Sheraton, Westin and Crowne Plaza, has been negotiating with Clarke since 1997. FelCor owns one other Embassy Suites hotel in Maryland, near Baltimore-Washington International Airport.

"We've pursued this for quite some time," said Bill Stuckeman, who heads FelCor's development program. "We've seen the market go up and down. ... This is the closet we've gotten."

FelCor has continued with acquisitions despite the dismal hotel market, which was made worse by the Sept. 11 terrorist attacks.

Occupancy and room rates have dipped nationally. Business travelers, the mainstay of many hotels, have not returned in great numbers.

Baltimore, with a relatively low number of hotel rooms, has been able to keep room rates high, Stuckeman said. Despite a location off the Inner Harbor, the two-room layout of an Embassy Suites, along with two ballrooms and some meeting space, should attract business people during the week and families on the weekends, he said.

He expects room rates to be lower than the prime hotels downtown but occupancy rates to be higher at about 70 percent to 72 percent.

There are two other hotels planned downtown on Redwood Street. A 176-room Marriott Residence Inn proposed for across the street by Donald J. Urgo and Associates has been awaiting final approval from the city for a tax break. A block east, a 171-room Hampton Inn and Suites has stalled.

The Baltimore City Council approved two PILOTs, or payment in lieu of taxes, for Clarke's project in 1999. The numbers will have to be refigured for this new proposal and then taken to the city's Board of Estimates, according to the Baltimore Development Corp., which negotiated the deal.

As currently structured, the hotel PILOT would save its owner $4.6 million in real estate taxes over 10 years while the garage PILOT would save its owner $3.3 million over 25 years.

The city, which collects an array of taxes from conventioneers and tourists, supports hotel development.

"I can think of no downside to having three hotels on Redwood Street, which is at the center of the old central business district," said Andrew Frank, the BDC's executive vice president.

"As development is drawn to the waterfront, the central business district must continue to diversify its economy and reinvent itself by finding new uses for old buildings and in-fill development sites."

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