News for the Hospitality Executive
|By Lorraine Mirabella, The Baltimore Sun
Knight Ridder/Tribune Business News
August 26, 2005 - Billionaire Robert L. Johnson, initially touted as the lead player in Baltimore's convention center hotel but consigned to a lesser role when the city decided to develop the hotel itself, could end up with no role at all.
And Johnson's company, RLJ Development LLC of Bethesda, and partner Quadrangle Development Corp. might not be paid for $700,000 worth of preliminary work if it isn't retained in some capacity, city development officials now say. The $700,000 is a portion of the $1.8 million fee the developers are requesting to oversee construction of the $305 million publicly financed hotel.
More than a year after Mayor Martin O'Malley and development officials endorsed the Johnson team, pinning their hopes for the city's future convention business on plans for a first-class Hilton hotel, Baltimore Development Corp. officials insist that Johnson, the co-founder of Black Entertainment Television, has never had a guaranteed role and knew that from the beginning. Several City Council members, however, say they are surprised that Johnson is not assured an ongoing role.
The BDC continues to recommend RLJ and Quadrangle for the role of owner's representative, otherwise known as construction monitor, and are negotiating the fee, said M.J. "Jay" Brodie, BDC president. But he said that decision is up to a nonprofit hotel corporation that has yet to be formed. The hotel corporation could negotiate a contract with the RLJ team or bring in someone else, Brodie said.
"We need someone to be the construction monitor," to ensure the hotel is built according to plans approved by the city and to Hilton standards, Brodie said. "Johnson and [Quadrangle] may or may not have a role."
As to the likelihood of Johnson's continued involvement, Brodie said, "We don't know, and can't guess. The board would vote. The corporation executes those contracts."
With the City Council poised to cast final votes on the hotel in less than a month, after initially approving it by a 9-6 vote, a lack of certainty is raising new questions among council members.
"Never has it been indicated that Mr. Johnson was a maybe," said Councilwoman Mary Pat Clarke, who voted against the hotel. "We don't really know how much it will cost, who will manage the assets, who will oversee the construction and whether it will attract conventions. This is an idea. It's not the kind of detailed proposal that we would require of a private developer."
Councilman Robert Curran, who supports the hotel, disputes the notion that the hotel corporation could remove members of a development team selected through competitive bidding.
"Obviously, the Johnson firm was the one" chosen after the BDC's request for proposals, Curran said. "They're the ones that will be managing the construction. I thought it was already etched in stone."
Johnson, who originally envisioned owning the Hilton, has declined to comment in the past two weeks on any aspect of his involvement in the project. In a Sun interview last month, Johnson said, "We were awarded the rights to negotiate with BDC. We're ready to move when the council authorizes the structure."
Thomas J. Baltimore Jr., president of RLJ Development, did not return calls seeking comment.
Johnson had the backing of the mayor even before the BDC requested bids from developers. A year before the BDC selected Johnson in late 2003, the hotel investor appeared next to O'Malley at a news conference to unveil Johnson's proposal.
Yesterday, a spokeswoman for the mayor said O'Malley would not comment on the Johnson/Quadrangle group's role.
"Jay Brodie speaks perfectly well for this administration," Raquel Guillory said. "The mayor would echo whatever Jay Brodie said."
Despite the presentation of Johnson's group as a partner in the project, it was only given the right to negotiate a deal with the city. The decision on whether to enter into an agreement will be up to the new hotel corporation, assuming that the City Council gives formal approval to the project, Brodie said.
The $699,000 RLJ has spent for preconstruction work includes helping to establish project goals, requirements and schedules, evaluating plans from architect RTKL (part of the team initially selected by the BDC) and assisting the BDC and RTKL in selecting contractors, such as interior designers and civil and mechanical engineers, said Irene E. Van Sant, project analysis director for the BDC.
"We have no agreement to pay them anything if they are not selected to move forward," Van Sant said.
The RLJ/Quadrangle joint venture is also helping to evaluate proposals from three design builders who are competing to construct the hotel. One proposal under consideration came from Baltimore-based Whiting-Turner Contracting Co., a former member of the Johnson-led hotel development team. Whiting-Turner failed to meet the construction budget, prompting BDC officials to ask in March for a new round of bids for the construction.
As the developer's representative, RLJ/Quadrangle, or whoever gets the
job, would play a crucial role, especially because the city is acting as
developer, experts said.
Johnson, who sold BET to Viacom Corp. for $3 billion in 2001 and now owns more than a dozen Hilton and Marriott hotels, including the Courtyard by Marriott at Harbor East, said he initially bid on Baltimore's project assuming that it would be a public-private partnership.
He said in the Sun interview last month that he believes that private and public interests should share in the great risk of a hotel.
Councilman James B. Kraft, an opponent of the publicly financed hotel, said he has had concerns about RLJ's role in the project.
"One of the issues I have continually raised is, 'Where is Johnson or a representative of RLJ?'" Kraft said. "Supposedly, they have had to be involved from the beginning, but we've never seen them."
The BDC counters that three RLJ employees have been working on the hotel: Baltimore, a former Hilton Hotels vice president for development; Carl Mayfield, a former project manager for national real estate developer Carr America; and Kate Henriksen, a former development director for Marriott Hotels.
RLJ is currently developing three hotels, a Hilton in Norfolk, Va., a Hampton Inn in Denver and a Homewood Suites in Houston. In mid-July, Johnson proposed a privately financed convention hotel with yet undetermined public subsidies in Washington, D.C.
Quadrangle, started in 1971 by Robert Gladstone, developed the Hyatt Regency in Cambridge, and a Grand Hyatt and a J.W. Marriott in Washington. Gladstone did not return repeated phone calls seeking comment.
"My inclination is always ownership," Johnson told The Sun last month. "It came back from Brodie that it was more economically viable to be a publicly owned hotel, and we would be the fee-based developer."
But, he said, "We're very comfortable proceeding with a publicly financed hotel in Baltimore."
Sun staff writer Doug Donovan contributed to this article.