A development group headed by Otis Warren and Theo Rodgers has finally obtained the financing commitment it needed to move ahead with construction of Baltimore's next major office project, the $39 million City Crescent complex for federal agencies at the southwest corner of Baltimore and Howard streets.
Baltimore's Board of Estimates approved yesterday a revised land sale agreement under which it has promised to lease the 11-story building for 15 years if the U.S. General Services Administration no longer wants to occupy it beyond the 10-year lease commitment it has made.
The city's promise either to lease the building or buy it gives the lender, a group affiliated with Legg Mason Realty, the assurance it sought to sell bonds that will provide the $39 million needed to construct the building, according to city officials who presented the plan to the board.
"The credit markets are so conservative that a 10-year lease [from the federal government] wasn't enough" for the developers to secure financing, said Jeff Middlebrooks, vice president of the Baltimore City Development Corp. "The creative leap was to have the city enter into a lease that is 11 1/2 years away," and which effectively leaves the building leased for a full 25 years at a rate that is sufficient to retire the bonds, he explained.
"This is it," Mr. Warren said after the board's action, which followed several months of negotiations involving the development team, lenders and the city and federal governments. "Everything is ready to go."
The 300,000-square-foot building has been designed to house the Baltimore offices of several federal agencies, including the Army Corps of Engineers, the Small Business Administration and the Department of Housing and Urban Development. The federal government is leasing it for $23.75 per square foot.
Mr. Warren said that the initial site work has begun and that the project will be complete by December 1992. It will be the first major office building constructed in downtown Baltimore by a group headed by black developers.
John Thompson, director of business and public affairs for the Philadelphia office of the GSA, said that the board's action was "the green light we were looking for." All the developer needs to do, he said, is show the GSA the funding agreement has been completed.
Mayor Kurt L. Schmoke said that he was "pleased and extremely proud" the developers were able to obtain financing for the project in such difficult economic times. "We're also pleased about the 1,000 federal employees who will be moving to Howard Street, which will serve as a stimulus for continued development" in the area, he said.
City Council President Mary Pat Clarke said that she was concerned the agreement would not protect the city from having to pay rent on a building it might not need.
But Mr. Middlebrooks said that the agreement calls for the city to pay a rental rate of $18.79 per square feet for the life of its commitment, which is likely to be relatively low for the market in the years 2003 to 2018.