RTKL cuts deal on Commerce Place lease

November 11, 1992|By Timothy J. Mullaney | Timothy J. Mullaney,Staff Writer

In a long-anticipated development, architecture firm RTKL Associates Inc. said yesterday that it has reached a deal to slash in half its lease commitment to the nearly finished Commerce Place tower at 1 South St.

The move, taken jointly by RTKL and its future landlord and one-time Commerce Place partner Harlan/KDC Associates Inc., was a response to depressed architecture business conditions that have forcedRTKL to lay off about a third of its staff since the original deal for Commerce Place was signed in March 1990. RTKL was the lead tenant as well as the architect for the 450,000-square-foot tower.

"Their choice was to stick us with the contract, or they could be practical," said Kurt Haglund, assistant to RTKL Chairman Harold Adams. "They could have, but we value long-term relationships."

The deal cuts RTKL's space commitment from 100,000 to just under 50,000 square feet. RTKL said it also received about a 20 percent cut inthe annual rent it will pay per square foot of space, from nearly $30 per square foot to "closer to $20," Mr. Haglund said.

In addition, RTKL said it will delay moving into the new building until July. And the firm said it has given up its equity stake of about 10 percent in the building, a stake that was a near-certain money-loser over the short term.

The new deal is a sharp reversal for the landlord. While renegotiating leases has become common during the recession, the reduction of RTKL's space is greater than RTKL had indicated during months of closely guarded talks.

Harlan/KDC theoretically could have enforced the old lease, but Kevin McAndrews, Harlan Co. managing director, said that option was only available in theory.

"The fact of the matter was that it would have had dire consequences for them," Mr. McAndrews said. "They don't have to threaten bankruptcy for us to understand that. It was better for us to have a healthy relationship with a healthy tenant than to have a lease on paper."

Mr. McAndrews said that a preliminary deal was reached in June but was not disclosed by either side, in part because it left open the issue of when RTKL would move into the building. RTKL had been expected to move from its offices at 400 E. Pratt St. late this year.

Harlan and its Japanese partner Kajima Development also had some brighter news. The law firm of Goodell, DeVries, Leech & Gray has agreed to lease 31,000 square feet in the 30-story building for 10 years, Mr. McAndrews said. That deal is worth about $6 million over 10 years.

Mr. McAndrews said the law firm will move from the First Maryland Building at 25 S. Charles St., probably next spring.

He said RTKL is now committed to take slightly less than 50,000 square feet, but is likely to lease a total of about 55,000, or three floors.

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