The Redwood Tower, a 16-story office building that was constructed almost entirely in the air rights above smaller buildings in the 200 block of East Redwood Street, will go on the auction block Jan. 7, the latest local victim of the recession's effect on commercial real estate.
The auction is a foreclosure sale on behalf of Security Pacific National Bank, a California-based bank that agreed in 1988 to lend the owners, Redwood Tower Associates Limited Partnership, $33.5 million to refinance the 202,400-square-foot building.
Attorneys for Security Pacific claim in documents filed with the Circuit Court for Baltimore City that Redwood Tower Associates owes the bank $34,373,741.67 as of Dec. 16 and that interest is accruing at the rate of $8,750 a day.
Located at 217 E. Redwood St., Redwood Tower is the second major downtown office building to become the subject of foreclosure proceedings this year. Six St. Paul Center, a 29-story building, was taken over recently by Chemical Banking Corp. of New York.
Atlantic Auctions plans to hold the Redwood Tower sale on the premises Jan. 7 at 11 a.m.
Redwood Tower represented one of the first local projects in which a new building was constructed over several smaller ones -- an attempt to build a large-scale office project with harbor views while preserving the character of the existing buildings on Redwood and Water streets.
Redwood Tower Associates is a Maryland corporation whose general partner originally was a corporation formed by Connecticut-based developer Scott Toombs and others.
Mr. Toombs has no ownership interest in the building, although his firm still manages it. A New York firm, the Taylor-Simpson Group, has been tending to the building on behalf of the investors but has no equity interest in it.
Designed by RTKL Associates and built starting in 1984 for $25 million, Redwood Tower is 76 percent leased. That level of occupancy has not been enough to enable the owners to meet their loan obligations, said Paul E. Taylor III, a partner at Taylor-Simpson.
"The problem is that the market has deteriorated badly," Mr. Taylor said. "There has been no significant [office space] absorption in the last few years, and meanwhile, several significant blocks of space have come on the market. The market is awash with space."
He said the owners negotiated with the lender for more than a year and "exhausted the universe of restructuring alternatives."