Harbor Court brings $78 million

THE BALTIMORE SUN

Baltimore gained a little cachet yesterday when it was announced that the luxury Harbor Court hotel will take on the prestigious InterContinental brand after the acquisition of the complex by a Massachusetts real estate trust for $78 million.

Hospitality Properties Trust of Newton, Mass., said an existing agreement was expanded to permit InterContinental Hotels Group to manage the 195-room hotel in the Inner Harbor.

InterContinental operates 13 other hotels owned by HPT through 2029.

The Harbor Court complex includes 72,000 square feet of office space and an attached garage with 530 spaces.

Condominiums associated with Harbor Court are not part of the sale. The hotel represented $60 million of the total $78 million purchase price.

"We're thrilled for the employees and the community, because we think the new owners are first-class and will continue maintaining the property at the highest level," said Edward C. Roohan, president and chief operating officer of seller Castle & Cooke, the Los Angeles-based development company controlled by David Murdock, who built Harbor Court. "We just thought the hotel was in terrific shape. Given the economy and where it was, we thought it was an excellent time to pass the baton to a new owner."

Murdock also recently tried to sell the One Market Center office and retail building at Howard and Lexington streets but currently still owns it. Castle & Cooke owns office buildings and warehouses in Baltimore but no other hotels.

The addition of the InterContinental flag would bring a hotel brand known for a high level of service and luxury to Baltimore. A Four Seasons, also a luxury brand, is planned for Harbor East.

One of the first upscale hotels in the revitalized Inner Harbor, Harbor Court has remained privately owned and operated since it opened in 1986.

It could not immediately be determined yesterday whether Werner Kunz, who has been managing director at the hotel since 1987, would remain in his position.

HPT, a real estate investment trust, owns 299 hotels in 38 states, Puerto Rico and Canada, including a Residence Inn in downtown Baltimore. Its other Maryland properties include Staybridge Suites and Courtyard by Marriott in Columbia; Homestead Studio Suites Hotels and Candlewood Suites in Linthicum; Homestead Studio Suites Hotels in Germantown; Residence Inn in Annapolis and the Courtyard by Marriott in Greenbelt.

The new owner expects to spend about $2.3 million over the next two years as part of the rebranding of Harbor Court.

HPT also has entered into a management agreement with an affiliate, Reit Management & Research LLC, to operate the office building and an agreement with InterPark Inc. to manage the parking garage.

"I think it's a positive for the hotel and a positive for the market," said Rod Petrik, a lodging analyst and managing director with Stifel, Nicolaus & Co. in Baltimore. "The belief is that the hotel is the best hotel in town but doesn't have the best rate or the best occupancy in town, so there's upside to having it branded. The fact that Harbor Court doesn't have the highest rates in town is indicative that they could benefit from a change in branding."

The hotel market has seen significant increases in value in recent years, Petrik said.

Hotel prices are up significantly at a time when supply growth is down and business and convention travel is up, Petrik noted.

"It's a seller's market," he said. "There's still a lot of money chasing deals."

For example, the D.C. Capitol Hyatt sold for $160 million in February 2004 and in September 2005 sold again for $274 million - about a 72 percent increase.

Petrik said a deal had been close last fall to sell Harbor Court to a private investor and flag it as a Ritz Carlton. HTP stepped in when that fell through.

Tom Corcoran, president and chief executive of FelCor Lodging Trust of Irving, Texas, which owns the Embassy Suites at Baltimore-Washington International Thurgood Marshall Airport, said the addition of the prestige brand was a plus for Baltimore

"I think the most important thing is that it's an international brand for an international city," Corcoran said. "There are thousands of pieces of collateral material that get attached to the InterContinental brand. Baltimore gets added to that list, and you've got someone marketing that city around the world."

John McLaughlin, a Baltimore-based advertising consultant and former partner at Gray, Kirk, VanSant, said some patrons who had been attracted by the uniqueness of the upscale boutique hotel may be put off by its new flag. But overall, he said, he didn't think the addition of the InterContinental brand would have much effect on Baltimore's image. "I don't think people tightly tie their brand perceptions of a hotel and knot it up with a city," he said.

HPT stock closed at $41.45 a share yesterday, up 24 cents.

june.arney@baltsun.com

Sun reporter Lorraine Mirabella contributed to this article.

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