Marriott to run hotel at Harbor; Bethesda-based chain to replace Wyndham on Paterakis project


Marriott International Inc. will replace troubled hotel chain Wyndham International Inc. as the operator of a 31-story hotel east of the Inner Harbor, ending months of speculation about the brand of the city's only major lodging project under construction.

City officials said yesterday that the involvement by Bethesda-based Marriott in the 750-room hotel will significantly boost the marketing of the Baltimore Convention Center, which, despite a $151 million expansion and upgrade, has been struggling with a lack of bookings.

"We've coupled the best waterfront hotel in the country with the best operator, Marriott," said Michael S. Beatty, a vice president at H&S; Properties Development Co., the real estate arm of baking executive John Paterakis Sr. that is developing the hotel with two Atlanta companies.

Doubts about Wyndham's involvement in the $117 million hotel have swirled around the project for months. In early June, The Sun reported that Paterakis, co-owner of H&S; Bakery Inc., had told city officials and others that the chain would not be the hotel's operator or owner.

When the city announced nearly three years ago that it would back the hotel with $85 million in financial incentives, Wyndham was to operate the hotel, and its parent company, Patriot American Hospitality Inc., was to be the owner.

"These are expensive, time-consuming, complicated transactions, and we weren't able to reach an agreement as we originally thought," said Fred Stern, a Wyndham vice president.

Despite doubts about Wyndham's involvement with the hotel, the city followed through on a commitment to give Paterakis' group a $5 million grant and a $5 million low-interest loan in July in exchange for a personal guarantee from the developer.

City economic development officials said at the time that they were confident that a high-quality company would be found to replace Wyndham if the chain pulled out.

Mayor feels 'very good'

"I feel very good about it because it means Marriott will be able to coordinate their marketing strategy and offer a larger block of rooms to conventions," Mayor Kurt L. Schmoke said yesterday.

"This clears up the water, so to speak," said Carroll Armstrong, president and chief executive of the Baltimore Area Convention & Visitors Association, the city agency charged with marketing and booking the Convention Center. "I think it will help us to move things along."

With Marriott as an operator, the hotel will be able to tap into a nationwide reservation system.

'Key location'

"It will give us additional market share, and it's a key location," said Roger Conner, a Marriott vice president. "And it's generally recognized that Marriott has the best group connections and is very strong in attracting convention business."

Conner said that the 1.1 miles between the hotel and the Convention Center will be an "easy distance to accommodate." That separation has caused considerable grumbling about the project.

"It shouldn't hurt the desirability of the project as a convention hotel, based on what we've seen in other cities," Conner said.

Marriott's affiliation will bring to four the number of lodging projects carrying the company's flags downtown. It also operates the Renaissance Harborplace Hotel and the Baltimore Marriott Inner Harbor, which contain a total of 1,147 rooms. H&S; Properties is also building a 207-room Courtyard by Marriott at Inner Harbor East.

A 250-room Ritz-Carlton hotel, also a Marriott brand, has been proposed south of the Inner Harbor, and a 125-room Residence Inn by Marriott has cleared several city Planning Department hurdles.

The $20.5 million Courtyard is scheduled for completion next summer. The Ritz-Carlton remains on the drawing board. Groundbreaking for the Residence Inn is expected before the end of the year.

The issue of who will own the 750-room Marriott remains unclear. Beatty said H&S; Properties will continue to "ultimately have some ownership stake" but that negotiations have begun with an affiliate of Aetna Life Insurance Co. that owns the Baltimore Marriott Inner Harbor.

Another obstacle

Wyndham's exit is the latest in a series of obstacles to confront the hotel. Most notably, the project has been the target of three lawsuits filed by a citizens group, which challenged and for a time held up roughly $75 million in tax breaks granted by the city.

As a result, Paterakis has been personally financing the hotel's construction since December. As of July, Paterakis had spent $17 million, according to documents filed with the city.

Its exit from the Inner Harbor East project represents a serious blow to Wyndham. On the heels of a forced restructuring in December, the company sold a 30 percent stake to New York merchant bank Apollo Real Estate Advisers L.P. and the Thomas H. Lee Co. As part of that deal, Apollo and Lee put more than $1 billion into Wyndham to help repay roughly $2.4 billion in debt that piled up when the Dallas-based hotel chain's earnings failed to meet expectations.

At its peak, Wyndham controlled 480 projects valued at $7.5 billion, ranking it among the the nation's largest hotel owners. Without new projects to add to its portfolio, though, Wyndham will have a difficult time generating earnings growth, lodging industry analysts have said.

Angelos seeks operator

The switch to Marriott from Wyndham comes as Peter G. Angelos is working to secure an operator other than Hyatt Hotels Corp. for an 850-room hotel the attorney and Orioles majority owner wants to build across from the Convention Center.

Angelos is frustrated with Hyatt because talks have stalled on linking the planned $175 million Grand Hyatt with the 487-room Hyatt Regency Hotel on Light Street, sources said.

New York developer Schulweis Realty is hoping to persuade the city to grant a payment in lieu of taxes (PILOT) for a proposed 600-room Westin Hotel on the site of the former News American building downtown. If the city's economic development agency and the City Council grant Schulweis a PILOT, it will aid in obtaining financing and shave millions of dollars off the project's total cost in the long term.

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