May 16--The old Post-Dispatch building in downtown Houston has been a vacant blight on Texas Avenue. 

It is a downbeat landmark for baseball fans who pass the building on their way to Enron Field. A chain link fence has been installed around the building's sidewalk to keep out undesirables. 

But the 75-year-old building is about to end its days as an eyesore. The owner says it will be transformed into a $50 million hotel. 

"It is going to be a very fancy hotel -- contemporary on the inside and the old building on the outside," said Steve Holtze, president of Denver-based Steve Holtze Hotels. 

The hotel, expected to open in fall 2002, will become a "boutique hotel" -- an emerging breed of specialty hostelries with a contemporary flair. 

The hotel will "exude an upscale urban loft experience," Holtze said. 

The hotel, called The Magnolia, will have 314 rooms, and they will not come cheap. Holtze said room rates have not been established, but he is expecting to get $175 to $200 per night and appeal to business travelers. 

The Houston hotel will be the third Magnolia Hotel for Holtze, who also operates Magnolia Hotels in Denver and Dallas. His Magnolia hotel in Dallas is topped with a neon Pegasus, a flying red horse that was the logo of the old Magnolia Oil Co. there. 

Holtze said he has secured most of the financing for the Houston project through a local bank. In addition, Holtze said he has preliminary approval to obtain an additional $9.5 million loan through the U.S. Department of Housing and Urban Development. 

In Houston, the Denver developer will be working with a 22-story building that has been vacant for many years. Former Texas Gov. Ross S. Sterling built the Post-Dispatch building in 1926. At that time, it was one of the tallest buildings west of the Mississippi. 

Sterling, one of the founders of Humble Oil and Refining Co., controlled a vast financial empire that included the Post-Dispatch newspaper. Sterling was the publisher of the Post-Dispatch, which later became The Houston Post. 

Shell Oil Co. was also a major tenant in the building at one time. 

The exterior of the Post-Dispatch building is wrapped in beige-colored limestone and it has heavy ornamentation near the top. 

On the lower part of the building an unfortunate renovation replaced some of the original beauty with sheets of black glass and pink granite. 

"Despite the brutal defacement of the lower two floors, the Post-Dispatch Building remains an authoritative classical presence on Texas Avenue," the Houston Architectural Guide says. 

The building formerly had the address of 1114 Texas Ave., but it has recently borne the address of 609 Fannin because the front door was moved around the corner. 

The Magnolia will be in a hotbed of historic renovations. On the same block, a 10-story building at 1120 Texas was recently redeveloped into a 31-unit condominium project called the Keystone. 

The Magnolia is only a block from the Rice lofts, the Capitol lofts and the St. Germain lofts -- all trendy residences recalling the spacious artist lofts of New York's SoHo district. 

In addition to the lofts, there have been other hotels proposed nearby. A Louisiana development group recently attempted to redevelop the nearby Texaco building into a Ritz Carlton hotel, but that deal fell apart a few months ago. 

With The Magnolia, Holtze appears to have a solid deal, said Mike Hassler of CB Richard Ellis. Hassler assisted Holtze is purchasing the Post-Dispatch building from the Fantex investment group over a year ago. 

Building more hotels downtown is an attractive proposal to developers these days. 

The downtown hotel market is exceptionally strong, and the 70 percent occupancy rate in downtown last year was the highest in modern times, according to hotel analyst John Keeling of PKF Consulting. 

"I think Houston is the best market in the nation right now," Holtze said. 

The high occupancy in downtown Houston office buildings creates an excellent atmosphere for having a successful downtown hotel, Holtze said. And four new office buildings are under construction downtown, which will only add more potential to the market. 

Holtze said he anticipates that the construction of the downtown arena for the Houston Rockets, an expansion of the convention center, and the construction of 1,200-room convention center hotel will improve the downtown hotel market. 

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(c) 2001, Houston Chronicle. Distributed by Knight Ridder/Tribune Business News. RD, SC,