A Houston hotel company yesterday finalized the purchase of the twin-towered Omni Inner Harbor Hotel for $25 million, the largest sale of a downtown lodging property in five years.
The Gencom Group said its interest in the 707-room Omni stems from improved occupancy and room rates for local hotels, as well as the anticipated boost to the area’s $1 billion tourist industry after the completion of the Convention Center’s $150 million expansion.
“As a reasonably priced convention destination, Baltimore is a great area,” said Lee Grossbard, a Gencom vice president of operations. “We’ve watched this particular property closely for three years now, and we like the Baltimore market.”
Gencom was able to monitor the 27-story and 23-story Omni because of its close relationship with Patriot American Investors Ltd. Partnership and Apollo Real Estate Investments, a New York merchant bank that bought the Omni for $17.5 million in September 1993.
Patriot, an Apollo creation and adviser, last October became a publicly held real estate investment trust and provided stock to Gencom’s founder in exchange for submitting properties to the REIT. Additionally, Patriot retained Gencom and another firm to manage its holdings as part of its formation.
“We’re just not long-term holders of real estate,” Lee Neibart, head of Apollo’s asset management division, said before the sale. “Our position is that we add value to properties and sell them to realize positive returns.”
Apollo controls more than $4 billion in investments in real estate, stocks and commodities.
By comparison, Gencom has a more than $150 million ownership stake in 47 hotels, containing more than 24,000 rooms. Of that total, the company manages 38 projects, including 15 in Patriot’s REIT.
The Omni is expected this year to generate annual revenues and net income in excess of $20 million and $2 million, respectively, according to Gencom projections.
Mr. Grossbard said Gencom hopes to raise the average occupancy rate at the city’s largest hotel from 60 percent to 65 percent by the end of the year.
The new owner also intends to spend $3.5 million to refurbish 200 guest rooms and the hotel’s lobby and restaurant, and to install new marble floors. Apollo had invested roughly twice that figure in the 29-year-old hotel.
“We’ll be doing things to create more of a sense of arrival,” Mr. Grossbard said.
But in buying the 101 W. Fayette St. hotel, Gencom American Hospitality Co. — the company subsidiary that will manage the Omni — will also inherit the labor problems of Metro Hotels Co., the former manager.
“The sale definitely changes our strategy,” said Paul Platosh, a representative of the Hotel Employees & Restaurant Employees International Union, AFL-CIO, in Washington.
“We’d like to start off on a good footing, and hopefully we can resolve the outstanding issues between us.”
The union charges that Metro laid off employees in an effort to cut costs and trimmed health care benefits. Two weeks ago, the organization filed an amended complaint of unfair labor practices against Metro with the National Labor Relations Board in Baltimore.
Mr. Grossbard said those complaints are now a moot point, since Metro will no longer be involved with the hotel. Gencom plans to offer employees a 401(k) pension plan, vacation time and benefits that Metro didn’t offer, Mr. Grossbard said.
“We’re interested in keeping employees long term,” he said.
Pub Date: 4/02/96
