New partners raise City Crescent hopes 11-story tower gets loan commitment

December 27, 1991|By Edward Gunts

Developer Otis Warren has brought in two new partners and lined up construction financing from a Japanese bank in order to get his City Crescent office building built in time to satisfy his lead tenant, the federal government.

Mr. Warren said yesterday that David Evans and Stephen Garchik of the Evans Co., a real estate development firm based in Northern Virginia, have joined the development team for the $38 million City Crescent building, planned for the southwest corner of Baltimore and Howard streets.

He said the Evans executives arranged a $35 million construction loan from the New York office of Toyo Trust Bank of Japan, a lender with which Evans has had previous dealings. He expects the loan to close in February.

In the meantime, Mr. Warren said, he and his new partners are putting up the money needed to begin work on the 11-story, 350,000-square-foot project, the first major office building in downtown Baltimore planned by an African-American development team.

Omni Construction Co., the general contractor, is scheduled to begin work Jan. 6.

The building will house the Baltimore offices of several federal agencies, including the Small Business Administration, the Army Corps of Engineers and the Department of Housing and Urban Development.

The latest developments apparently mark the conclusion of a protracted series of negotiations that Mr. Warren's group, City Crescent Limited Partnership, went through to obtain financing at a time when local lenders were unwilling to support the project.

City officials told the Board of Estimates last fall that the developers contacted local banks but were told the lenders were unable to make a loan because of the "credit crunch" affecting the real estate market in general and the increased involvement of federal regulators.

On several occasions last fall, U.S. General Services Administration officials gave Mr. Warren a deadline to show that he was making progress in lining up financing, or else they said they would consider working with another developer at another site.

In October, city officials agreed to lease the building for 15 years if the GSA didn't want it beyond GSA's 10-year lease commitment, but the financing still didn't materialize.

"Everybody's really happy about it," Mr. Warren said of the Japanese bank's loan commitment. "This will be the largest federal office building in the country that is owned and operated by a minority group, and that's something to look forward to. I hope it won't be the last."

"We are aware that the Evans group has become involved," said Neil Skidmore, procurement analyst for the GSA's Philadelphia office. Although some tenants have been getting "antsy" about delays in financing the project, "we have a high level of confidence that it will be completed," he said.

"It's a wonderful conclusion to what has been a difficult process," said Honora Freeman, president of the Baltimore Development Corp. "We're delighted it is closer to fruition today than it was a month ago."

Mr. Warren said the Evans representatives were instrumental in helping line up financing for the project, which is almost fully leased. He also credited Mayor Kurt L. Schmoke and his administration for working closely with the development team to keep the project on track.

"The real turning point was bringing Evans into the partnership and the mayor standing behind the lease," Mr. Warren said. "If the lease was not there, it couldn't have been done.

"The mayor has been right there assisting us in every phase of it -- communicating with the GSA, talking with lenders. Once we were awarded the property, he got 100 percent behind it."

Mr. Warren said he had known the Evans representatives for some time and recently got to know them better when they teamed up with him to submit a proposal to the city to develop a parcel for the Health Care Financing Administration just north of Camden Yards.

The Evans-Warren group eventually lost that bid to a group headed by the Rouse Co., Whiting-Turner Contracting Co. and Daniel Henson III, but Mr. Warren began talking to the Evans representatives and his local partners about involving Evans with the City Crescent project.

"In light of the economy, we had to show that we could bring it about," he said. "The partnership agreed that the best thing would be to involve new partners who could bring some money in and some more experience in."

Mr. Warren said that the City Crescent Limited Partnership will continue to be a minority-led team because a group he controls, Otis Warren of Maryland, has a 51 percent ownership interest after the restructuring and that he is still the managing partner.

Mr. Evans and Mr. Garchik, who are white, formed a group called the Friends of City Crescent, which has a 41 percent ownership interest in the project. Mr. Warren said A & R Development Co. and Parsons and Co., local groups involved in the project from its inception, have become special limited partners and have the remaining 8 percent interest.

"We haven't changed the partnership," Mr. Warren said. "We just changed the ownership structure. . . . I wanted to maintain minority ownership, and the mayor did, too."

When city officials selected Mr. Warren's team to develop the Howard Street site more than a year ago, they also awarded to it the rights to build a garage and 175-unit apartment tower at the southeast corner of Redwood and Eutaw streets and a second office building containing up to 250,000 square feet of space at the northwest corner of Lombard and Howard streets.

The 700-car garage is under construction and slated for completion by April.

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