State gets leverage as well as office spaceThe state of...

COMMERCIAL REAL ESTATE

July 28, 1993|By Tomothy Mullaney | Tomothy Mullaney,STAFF WRITER

State gets leverage as well as office space

The state of Maryland has found a novel use for its new office building at 6 St. Paul Centre. It's not only a home for under-housed state agencies, but also a club to use on landlords agencies that might want to stay put.

One example: the state Attorney General's Office.

Department of General Services officials have met with David Kornblatt, owner of the St. Paul Plaza complex at 200 St. Paul Place, in a bid to renegotiate the attorney general's lease, which comes up for renewal in September 1994. The alternative: moving the lawyers down the street.

The state's relationship with St. Paul Plaza has been controversial.

The lease, signed at the height of the real estate boom in the late 1980s, was criticized by legislators as too rich. The General Assembly in 1991 also declined to buy six stories of the building for $22 million.

The attorney general's lease of 100,000 square feet is a linchpin for the building, which has been in and out of a Chapter 11 bankruptcy reorganization. But the reorganization's terms, which require enough cash flow to pay off the reduced mortgage on the property, limit Mr. Kornblatt's ability to renegotiate.

"There have been discussions between DGS and our landlord," said Deputy Attorney General Ralph Tyler, adding that the attorney general has about 80 lawyers, plus support personnel, at the downtown site.

He says the office moved to the building after signing a five-year lease with an option to renew for five more.

"I'm optimistic but I don't want to say anything. We're in negotiations . . .," Mr. Kornblatt said.

Department of General Services spokesman David Humphrey says the 305,000-square-foot 6 St. Paul Centre building, which the state bought for $12.2 million this year after the building failed to lease fully in seven years on the market, will house from five to 21 agencies.

He says talks about the attorney general's lease will be a major factor in determining the use of 6 St. Paul Centre.

Investors say luster of hotels has faded

Apartments are in and hotels are further out than a Ken Griffey Jr. batting-practice shot.

That's the conclusion of a survey of real estate investors and lenders by Fleet's Guide, a unit of Virginia-based Fleet Press Inc. The guide asked 404 people ranging from bankers to insurance company and pension fund portfolio managers to pinpoint the type of property they would consider investing in.

"Of the 43 property types featured in Fleet's Guide, 21 experienced an increase in the percentage of institutions expressing investment interest for the second half of 1993, 19 showed a decline and 3 stayed the same," the guide's report said. "This is the first time since the semiannual survey began in 1988 that more properties increased in popularity than decreased."

Just more than 75 percent of the investors said they were interested in buying or lending to unfurnished apartment projects, the strongest category on the list. Warehouse/distribution space was second at 68.3 percent and strip retail centers with anchor tenants were third at 62 percent.

At the bottom of the list was "national chain hotel/motel" at only xTC 6.7 percent, although that was up from 6.1 percent at the beginning of the year. That category was at 26 percent in 1989.

Apartments have been in favor because they tend to be steady producers of income. Hotels have suffered through a wave of foreclosures, largely because of industry room-occupancy rates that have hovered at slightly more than 60 percent.

Low interest rates means bills get paid

Dun & Bradstreet Corp. offers some good and bad news for the real estate market.

Buoyed by lower interest rates, real estate firms are paying their bills on time more often. But the construction sector remains the slowest bill-payer around.

Dun & Bradstreet Information Services says real estate was the only major sector to significantly improve in paying its bills during the first quarter of 1993, the most recent for which figures are available. The firm bases the statistics on reports from its clients, which pass along information on their experience collecting bills.

The firm says the construction industry still has "excess capacity" -- too many companies chasing too little business.

Colonnade responds to creditors' petition

As expected, attorneys for The Colonnade have asked a U.S. Bankruptcy Court judge in Baltimore to dismiss an involuntary bankruptcy petition filed by a Washington construction company and two other creditors. The Guilford complex claims that the petition was filed in bad faith to interfere with an auction of the hotel and condominium development.

Colonnade L.P. has no assets besides the complex itself, which will not bring enough money at an auction to pay a $16 million mortgage owned by a Washington investment firm, attorneys Paul Nussbaum and Lawrence Yumkas said in legal papers filed July 20. That firm, Uptown Hotel Corp., had planned a foreclosure auction July 13.

The claims of Tiber Construction Co. of Washington and two subcontractors can be paid only after Uptown Hotel is paid.

Mr. Nussbaum says no date has been set for a hearing on either Tiber's petition or Colonnade's dismissal motion.

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