A historic YMCA in Mount Vernon, once home to confessed Soviet spy Whittaker Chambers and a hotel run by the former Baltimore International College, is to become a 197-room Hotel Indigo, one of the new owners said.
Focus Development LLC principal Shaffin Jetha, whose firm is partnering with Kinsley Equities on the deal, declined to specify the sales price of the 1907 building at 24 W. Franklin Street, but said the total cost of the project, including $14 million planned for renovations, is about $21 million. The deal has not yet been published in the state system.
Virginia-based Stratford University, assumed control of the property in 2012 after taking over the Baltimore International College, which was in danger of losing accreditation. Stratford said at the time of the takeover that BIC’s properties would likely be sold to help pay off $10 million in debt.
Stratford is also trying to sell a properties at 17 S. Commerce St. and 206 E. Redwood St., said Transwestern vice president Leo McDermott, who worked on the deal for Stratford. BIC in 1993 purchased the building, which was converted into a hotel during the 1980s, and used it for hotel training and dorms, according to Baltimore Sun archives.
Jetha said the new building, officially owned a venture called by MVH Baltimore Hotel LLC, will fill a gap in the hotel market by serving visitors drawn to Baltimore by attractions beyond the Inner Harbor, such as the Lyric Opera House and the Peabody Institute.
“There’s a lot of business that’s not on the harbor,” he said. “We think there are a lot of great things happening in Mount Vernon and a lot of great things happening in Charles Street …. I think it’s just going to be a better and better location.”
The Hotel Indigo project will receive about $2 million in federal historic tax credits, Jetha said. It is also supported by $6 million in second-tier financing though a federal investor visa program, which allows foreigners to secure permanent residency in exchange for an investment of at least $500,000 that creates or preserves at least 10 jobs for two years, said Lewis Laskin, international marketing coordinator for Oriental Dolphins, the Annapolis-based firm that arranged the loan.
Laskin said it is the first time the EB-5 program, which started in 1992, has been used to finance a Baltimore development. Nationwide, its popularity has grown, as traditional lenders pulled back during the recession. A Brookings Institution survey found the number of visas issued through the program grew from approximately 800 in 2007 to 6,600 in 2012. A total of 10,000 can be issued each year.
The program, which is currently dominated by investors from China, offers interest rates in the range of 2.5 percent to 5 percent, typically lower than traditional mezzanine financing, despite taking on the risk of a second-place lender, Laskin said.
“We fill a great need because often the secondary financing is very, very expensive,” he said.
Jetha, who also worked on the Hampton Inn & Suites and the conversion of the Highlandtown Middle School into apartments, said he is interested in using the program for other projects.
“We’re always looking for efficient forms of equity that are less expensive than running around and finding a dozen different partners,” he said, “They get their immigration visas and the benefit for us is we’re allowed to invest in projects that have a little longer time horizon and still do them because our capital has patience.”
Mount Vernon Hotel will remain open until about November, before closing and reopening next spring, Jetha said. Renovation include replacing bathtubs with showers, installing hardwood floors, and updating a “lounge-y” restaurant. The agreement for the Hotel Indigo brand includes a provision that bars other hotels from using the flag, he said.