News

Developer loses land for hotel

By Richard Gaines
Staff Writer
Published: August 26, 2008

A subsidiary of an Illinois bank has taken the deed to the beachfront property on the Fort where Clarence Birdseye figured out how to flash freeze fish and Peter Maggio, the owner until recently, had been planning to develop a Marriott hotel.

The bank's action should not affect the hotel deal, Maggio said yesterday.

A commercial real estate broker, who had been working for Maggio, is now working for the bank that took the property from Maggio last month.

Broker Sargent Goodchild said he is in "delicate negotiations" with the same hotel developing team that had been working with Maggio. "I don't want to say too much." But he noted that "the bank wants to sell that property."

Maggio also surrendered to a subsidiary of First Bank & Trust Co. of Illinois his cold storage facility in the Cape Ann Industrial Park and a 200,000 square foot facility in Cranston, R.I., according to documents on file at the Essex County Registry of Deeds.

The nature of the transaction is similar to a foreclosure.

The bank had written an $18.75 million mortgage loan to Maggio's Gloucester Warehouse Realty Limited Partnership in 2004.

A year later, Maggio sold a 45,000 square foot freezer-warehouse on the Jodrey Fish Pier to Cape Seafoods Inc.

"I've worked through $12 to $14 million of equity in the last two years, I'm all tapped out," said Maggio.

He said he would continue to run his cold storage business in the facility.

Maggio told the Times that negotiations with his former unidentified potential hotel development partners would not be affected by the transfer of ownership of the 65,000 square foot cold storage facility on two acres next to Pavilion Beach.

Goodchild, of the commercial real estate firm CB Richard Ellis, said the firm, which represented Maggio in his effort to close the Marriott deal and sell the property, has been retained by the Illinois bank to continue in that role.

The bank's decision to take the property here and in Rhode Island from Maggio took place in late July. The possibility of putting a hotel on the Fort has been linked to the city's rezoning the peninsula at the foot of Rogers Street that has been identified by Mayor Carolyn Kirk as job one in a comprehensive effort to revitalize the waterfront.

The Planning Board on Monday took the assignment from the City Council to begin hearings to rezone the Fort that could stretch through the rest of the year before resolution back at the council.

A non-binding recommendation from the mayor's office and the Community Development Department proposed in July that the beach side of Commercial Street, described as "the flats," where Birdseye packaged and froze fish and where Maggio continues to operate a cold storage business in the same facility would become a "central business" zone that allows hotels.

The present marine industrial zoning does not allow hotels.

An expected pivotal issue in the zoning and negotiations with the developers — one of whom is said to have long, close relationship with Marriott — is a condominium component in the hotel business plan.

The combination of residences and hotel rooms in the same facility is normal today, especially in a somewhat seasonal market, such as Gloucester.

"We've made no secrets of the residential component," said Maggio.

According to Maggio, Marriott had approved the project, and would license the use of the brand and name, in effect authorizing a franchise deal, rather than owning or operating the hotel.

The idea of a hotel on the Fort — or anywhere else on the waterfront — was discussed widely in a series of "listening post" meetings called by the mayor last spring to gauge community desires for the future of the harbor.

In March when he still owned the site, Maggio said he and his potential partners intended to put up a beachfront, 120 room hotel if the zoning changed. Birdseye developed the site in the 1920s and it was used as a fish processor through the 1990s and into this decade until Good Harbor Fillet moved into the Blackburn Industrial Park.

"The site will post challenges for redevelopment, even with the change to central business zoning," wrote the waterfront planning firm, Norris & Norris, which had been hired to advise the mayor on the rezoning process.

But the waterfront planning and architecture consulting firm also said the beach side of Commercial Street south of the Chamber of Commerce building presents an opportunity to replace the "dated masonry food processing complex, such as encouraging the current interest in a hotel with a possible residential component."

Maggio said the onus is still on the city to remove zoning prohibitions to the hotel.

"If not, there will be an old building on that beach for a long time," he said.

Maggio said he was undone by a "perfect storm" of problems, the universals that combined to make the real estate bubble go pop and those such as the climb of energy costs that hit inordinately hard in his electricity dependent sector — cold storage.

He said his electrical bill tripled from 2004 to 2007.

"I've been at this for 40 years, and I didn't see this coming," he said. "I blame myself for getting out that far."

He praised the bank for giving him more time to find a solution than was required.

Richard Gaines can be reached at rgaines@gloucestertimes.com.

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