City role is key to developer for hotel


The city has pursued a convention headquarters hotel for years to attract more business to its underperforming convention center. Now, after a bidding process that ended Monday, it has three proposals to choose from.

So how will it make its selection? All met requirements for the number of hotel rooms and meeting and parking spaces on the city-owned site just west of the convention center. One team boasts a Hollywood celebrity, one a nationally prominent businessman, the third well-known local business people. One includes a film studio, and another offers a replacement for the 1st Mariner Arena. Two would build a headquarters for a locally based international charity. All have built other hotels.

In the end, observers say, Baltimore has to decide how big a role it wants to play in paying for the hotel, which bells and whistles appeal most and which developer can live up to its expectations.

"It comes down to what the city wants," said Heywood T. Sanders, chairman of the public administration department at the University of Texas in San Antonio and a convention industry expert.

"Then the city would be well-advised to look at what [the development teams] have done in other places and their track record. The city would be well-advised to consider potential risks and, if they own the hotel, the extent to which they want public dollars exposed to the risks of the hotel business."

The Baltimore Development Corp., the city's economic development arm, declined to comment on the specific proposals, but has said in the past that it will look for the best product and return to the city, and will evaluate all options, including owning and paying for the hotel by issuing bonds.

Most of the convention hotels built today are owned by their host cities and financed by municipal revenue bonds that are repaid with money from the hotel and supported with other streams of revenue, such as food or parking taxes.

The city will look at the total packages.

Atlanta-based Portman Holdings would team with Treyball Development Inc., a Beverly Hills, Calif.-based real estate company headed by actor Will Smith and his brother Harry. Portman is one of the nation's largest convention hotel builders, with 11 completed in some of the largest U.S. markets.

Smith's company has built no hotels, although it is working with Portman on one in Philadelphia. Smith's connection to Baltimore is through his wife, actress Jada Pinkett, a city native.

But his expertise on the project would come on the studio pitched as part of the proposal. The studio would be used by television and film crews and double as extra exhibition space for the convention center, according to Robert C. Hazard III, a consultant on the proposal.

"On that site, it would be shortsighted to not use it for tourism-related assets," he said. "In general, the city needs to decide what's important to them. Saving the convention center has got to be high on their list. No one has the same level of experience in this as Portman."

Portman has not signed on a brand name for its hotel. The team would finance the project whichever way suits the city, Hazard said, although subsidies would certainly be required.

A second proposal came from a development team headed by Dallas-based Garfield Traub Development LLC, which has built many hotels in markets such as Overland Park, Kan.

This team began from a conversation local developer Otis Warren had with architect Peter Fillat, who designed the Baltimore Marriott Waterfront hotel, among others. It snowballed from there.

Warren said Fillat called Willard Hackerman, head of Whiting-Turner Contracting Co. who controls the Sheraton Inner Harbor as well as a neighboring parking lot, and has an exclusive agreement with Starwood Hotels & Resorts Worldwide International hotels, which owns the Westin brand. Starwood, in turn, called Garfield Traub.

Two proposals

This team has put forward two proposals. One would build a Westin on the city-owned site next to the convention center, financed through tax-exempt municipal bonds. A second would put a new arena there and the convention hotel on Hackerman's parking lot, which does not have the same height restrictions and would support a hotel tower.

An office building to serve as headquarters for Catholic Relief Services would be built on the site of the current 1st Mariner Arena on the west side of downtown.

"We thought this should happen," Warren said. "We began to think about it. We got excited about it. ... My team is interested in what's best for Baltimore. We should be given a fair chance."

Warren cautioned the city not to get caught up in the celebrity of Will Smith or of Robert L. Johnson, founder of Black Entertainment Television and a partner in the third team.

Johnson's RLJ Development LLC is based in Bethesda and owns the Courtyard by Marriott in Inner Harbor East and other hotels.

Tom Baltimore, an executive with the company, said he hoped the investment in the Courtyard would send a message that RLJ Development is able and willing to put its resources in the city. It has no hotel development experience, but its partner is Quadrangle Development Corp. That Washington-based company has built hotels in the nation's capital, as well as the Hyatt resort in Cambridge on the Eastern Shore.

This team and its plan were put together with the help of the Baltimore Development Corp., which requested further bids once RLJ and Quadrangle submitted a proposal.

It includes a new headquarters building on the site for Catholic Relief, which expressed interest in moving there.

"We worked hard to be compliant with the city's [request for proposals]," Baltimore said. "We've assembled a strong team."

The team is proposing a Hilton. Financing methods are under discussion.

Managerial abilities

If the city does finance the hotel with bonds and own the complex, the developers' abilities as construction manager will come into play.

In the past, each developer has faced delays on projects, some because of such factors as weather.

A deeper assessment will need to be made by the city before it can sell bonds, said Kenneth Gear, an official at the rating agency Standard & Poor's.

"We assume whomever the city picks will have a good reputation and a good track record," Gear said. "We make certain assumptions that the developer meet basic criteria. The wrong developer can lead to cost overruns."

Warren Marr, director of Hospitality and Leisure Consulting at PricewaterhouseCoopers, agreed that experience and track records are vital.

"Hotels are a complex piece of real estate to build," Marr said. "Credibility of your developer is extremely important to getting their projects off the ground. If you're selling bonds, the track record is important. If you're building, you need to know you will get your hotel on time and on budget."

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