Developers of a Hampton Inn & Suites downtown said yesterday that they expect to break ground in the next week or two, making it one of the first to overcome the economic slump that had stalled projects all over Baltimore.
Financing has been the main sticking point for most of the delayed hotels, but industry observers say lenders nationally are looking at some hotels again - and say Baltimore is high on their list for consideration.
Focus Development LLC, led by Shaffin Jetha, was able to secure a construction loan from Corus Bank of Chicago for the 116-room hotel at Calvert and Redwood streets.
"The Baltimore market has been reborn sufficiently, and lenders are again looking at deals," said Alfred W. Barry III, a planning consultant hired by the developers to shepherd the project through city approvals. "We'll have a groundbreaking in a couple of weeks, and you'll see some work over there in the next week or so."
The Hampton Inn and Suites project in the former USF&G; Corp. building has been retooled a few times since it was proposed about three years ago.
The worsening economy made financing tough. The September 2001 terrorist attacks on Washington and New York further stamped out travel and lenders' willingness to finance hotels.
Jetha, who owns the Best Western at the Baltimore Travel Plaza in southeast Baltimore, pooled resources with Winston Hotels Inc., a Raleigh, N.C.-based real estate investment trust, to raise the $18.5 million needed for the Hampton Inn project.
That was made easier when lenders looked at the numbers, the developer said.
Occupancy at existing hotels in Baltimore has rebounded this year to 68 percent. It had been 69.3 percent in 2000, but dipped to 64.6 percent last year, according to Smith Travel Research. The average room rate is almost $112, which is among the highest it's been in two years.
Hotel industry experts say Baltimore was not hit as hard by September 2001 as were cities such as Las Vegas to which so many visitors usually must fly.
"There's cautious optimism," said Charles S. Fitzgerald, a regional real estate executive for Bank of America. "The city was not as adversely affected by Sept. 11 as other major markets."
That means several projects are likely to be funded in Baltimore, although obtaining financing is still difficult, said Rod Petrik, a managing director at Legg Mason Wood Walker Inc. who tracks hotel financing. "Baltimore is one of the stronger markets in the country in terms of occupancy," he said. "The fact that money is coming to Baltimore, especially to the major brand names, is no surprise."
Petrik said lenders would respond first to the limited service hotel developments, which are cheaper than the large convention and luxury hotel projects. They will be attracted to developers with good track records and money, and they will look to see that they have signed on a major brand such as Hilton or Marriott to flag the hotel.
Those two brands - proposed for several of the hotels planned in Baltimore - flag 15 percent of the nation's hotels and will account for almost half of the new hotels constructed in the near future. Developers always flock to the major brands first, Petrik said. The hotel analysts said, however, that it is still uncertain how many of the proposed hotels would be built because the shaky economy has not made lenders universally confident that all the new rooms can be filled.
That has not stopped other hotel developers from going after the money.
There are about 10 hotels proposed in Baltimore, and many of the developers say they will move forward with their projects. Donald J. Urgo & Associates received approval Wednesday for a city tax credit called a PILOT, or payment in lieu of taxes, for its hotel a couple of blocks west on Redwood Street from the Hampton Inn. The PILOT closed a gap in financing, said the developer.
"We'd like to start as soon as we possibly can after getting through the process," said Kevin Urgo, the company's senior vice president, just before he won the PILOT. Urgo expects to break ground before the end of the year.
Other hotels have not yet secured all of the financing they need to begin work, although the developers are optimistic. J.J. Clarke Enterprises, for example, is negotiating a deal for a long-delayed Embassy Suites hotel at One Light St.
Other much larger, full-service hotels have been proposed, but their developers haven't yet sought financing, including a new Hilton convention hotel announced this week and a Four Seasons in Inner Harbor East.