Hotel Employees and Restaurant Employees Union Releases Report Analyzing Hidden Risks of Proposed Baltimore
Ritz-Carlton Project
Press Release
September 6, 2001
BALTIMORE, MD -- Yesterday the Hotel Employees and Restaurant Employees International Union released a report analyzing
the hidden risks of a proposed Ritz-Carlton hotel/condominium project being planned for Baltimore's Inner Harbor.
The proposed project being developed by New York-based L.I. Square Corp will have 225 hotel rooms and 97 condominiums
at an estimated cost of over $155 million. If completed, the hotel and condominiums will be managed and operated
through management contracts by Ritz-Carlton Company LLC, a subsidiary of Marriott International, Inc. (NYSE:MAR)
L.I. Square Corp. is currently seeking financing for the proposed Ritz-Carlton project. The report, intended for
prospective investors, examines four principle risks of the project - the developer's troubling financial history,
environmental issues, potential operator problems, and the threat of labor unrest -- to assist investors in their
due diligence activities.
The risks detailed in the 7-page report include the following:
- Philip Pilevsky, the principle owner of L.I. Square Corp., has a troubling history of bankruptcies and foreclosures.
Mr. Pilevsky's real estate partnerships were involved in eight foreclosures and three bankruptcy filings on various
shopping centers in the early 1990s, and six foreclosures and nine bankruptcy filings on non-retail properties.
- There is a strong likelihood of major labor unrest at the project given the fact that L.I. Square Corp. has
not obtained labor peace agreements with the building trades and service unions. Barring a labor peace agreement,
those unions have pledged to pursue all legal options to oppose the project, including the use of pickets, strikes,
boycotts, and other activities. The risks of labor unrest at the project is heightened by the fact that the operator
of the hotel - Marriott International (NYSE:MAR - news), through its subsiduary Ritz-Carlton - has a history of
contentious labor relations.
- According to a recent litigation, owners of a Ritz-Carlton in Puerto Rico have raised allegations about the
management practices of Ritz-Carlton. On March 30, 2001, Green Isle Partners, Ltd., filed a complaint under the
Racketeering (RICO) Act seeking at least $420 million in damages, alleging that Ritz-Carlton and Marriott International
breached their management contracts and fiduciary duty, falsified records and used kickback schemes to defraud
Green Isle Partners, Ltd. According to Green Isle, the company ``has lost all confidence in Ritz-Carlton's management
of the hotel,'' and was recently forced to file for bankruptcy as a result of its fight with Ritz-Carlton.
- According to Disposal Safety Incorporated, a respected consulting firm which specializes in third party review
of groundwater and soil contamination investigations, there is abundant evidence to warrant a thorough field investigation
to determine whether the proposed site for the Ritz-Carlton project is free of environmental contamination. A thorough
preliminary assessment should be conducted to properly characterize the site to permit assessment of the potential
risks.
For more information or a copy of the report, please contact Nick Weiner at HERE Research, 202/661-3693 or at nweiner@hereunion.org.
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Contact:
Hotel Employees and Restaurant Employees International
Nick Weiner, 202/661-3693
nweiner@hereunion.org
SOURCE: Hotel Employees and Restaurant Employees International