When they gained control of the Southern Hotel by putting in a secret bid at a public auction in November of 1988, partners of One Light Street Joint Venture thought they had accomplished the trickiest part of assembling a parcel large enough to &L construct Baltimore's tallest office building.
But they did not count on a recession, a war in the Persian Gulf, financial problems at some of Maryland's largest employers such as Maryand National Bank and USF&G Corp. and a dramatic slowdown in the downtown office leasing market.
Twenty-nine months later, the group headed by the Baltimore office of Trammell Crow Co. has spent more than $8 million to acquire five other properties in the area bounded by Light, Baltimore, Redwood and Grant streets. They have completed their architectural design and received approvals from various city agencies. They have also relocated tenants in the buildings that are to be razed.
But they still haven't put a shovel into the ground for the project, a $200 million, 45-story office tower called One Light Street. And the recent disclosure that there will be another auction April 17 for the 13-story hotel -- the largest property in the assemblage and the one piece they thought they had locked up early on -- raises questions as to whether they ever will break ground.
Dirk Mosis, partner in charge of Trammell Crow's Baltimore office and mastermind behind the 750,000-square-foot project, remains optimistic that it will take shape, although perhaps not on the timetable he originally envisioned.
"It'll end up happening," he said last week. "Somebody will do it, and I hope it will be us."
Mr. Mosis said that his office is still marketing the project aggressively and is in advanced negotiations with two serious prospects.
Yet he knows that by Wednesday his group may no longer be in control of a building considered a key to the development. Even worse, it could fall into a competitor's hands.
Trammel Crow's inability to move ahead with construction -- after four years of planning -- reflects the current real estate market and financing climate, which make it difficult for any developer to move ahead with a high-rise project without a lead tenant.
Even well-regarded developers who have finished major projects recent years have not necessarily been free of financing problems. Last week, the David Kornblatt Co. filed for protection from creditors under the U.S. Bankruptcy Code. And Maryland National Bank started foreclosure proceedings against three large Maryland projects of Rouse and Associates, a Philadelphia-based company.
"It's the story of American real estate today," Mr. Mosis said.
People may not realize that Trammell Crow and its partner, Capital Guidance of Geneva, Switzerland, never actually became the owners of the Southern Hotel after they submitted the high bid for it at auction.
When they bid $6.5 million for the hotel at 14 Light St. on Nov. 17 1988 -- acting through a straw corporation called Epworth Properties -- they were required to deposit $400,000 in cash and pay the rest within 60 days.
The auction was a foreclosure sale on behalf of Signet Bank/Maryland, which loaned $6.3 million to a previous group that wanted to upgrade the building for continued use as a hotel but was unable to complete work. That group included
Jeffrey Levitt, Ellis Goodman, Michael Yerman and two subsidiaries of the now-defunct Old Court Savings and Loan Association. Their partially completed project was halted after Old Court went into state conservatorship in May of 1985.
After Epworth made the highest bid, the Trammell Crow entity negotiated an agreement with Signet that allowed it to retain control of the hotel without paying the $6.5 million in the required 60 days.
For nearly a year, Trammell Crow paid the interest on the Old Court group's loan, plus additional fees, and Signet postponed the due date for the $6.5 million.
Then in September of 1989, the developers negotiated an agreement with Signet that gave them 18 months more to pay the $6.5 million. In return, they agreed to pay off three years worth of back taxes on the property, keep paying interest on the Old Court loan and otherwise clean up outstanding debts. Trammell Crow had until March 29, 1991, to pay the loan.
With that breather, Trammell Crow wasted no time in completing acquisition of other properties in its assemblage, negotiating with Baltimore's Commission for Historical and Architectural Preservation to obtain permission to raze the hotel and marketing its proposed tower.
Between the land acquisition, relocation of tenants, legal and design fees and other expenses, Mr. Mosis said, his group has already spent "in excess of $15 million" on the project.
While the 18-month grace period gave Trammell Crow time to move ahead with planning, it also saw the onset of the current slowdown in the real estate market.