State wangles rent cut at 200 St. Paul Place 6 St. Paul purchase used as leverage

October 01, 1993|By Timothy J. Mullaney | Timothy J. Mullaney,Staff Writer

In a deal that underscores the recession's damage on commercial office values, the state has wangled a lease renewal for the headquarters of the Attorney General's office that could reduce the state's rent by 30 percent, or $700,000.

The Department of General Services, which negotiates office space for state agencies, had threatened to move the Attorney General's office from its quarters at 200 St. Paul Place to force developer David Kornblatt to lower his price.

The Attorney General lease has been the keystone of an effort by DGS to use the state's new office tower at 6 St. Paul St. to force other landlords to cut rents.

The two leases -- one signed at the peak of the 1980s bull market in office space, and the latest, signed at perhaps the bottom -- show how sharply the recession cut commercial real estate values.

The new lease with Mr. Kornblatt calls for the state to pay an average of $18.73 a square foot per year, down from $25.37 a square foot under the old lease. The state leases 96,672 square feet from Mr. Kornblatt.

"You know and I know that this is extremely representative of how values have fallen in the real estate industry," said J. Joseph Casey, president of Casey & Associates, a Baltimore-based commercial brokerage firm. "That 30 percent is typical not only in Baltimore but throughout the U.S."

The lease will be voted upon by the state Board of Public Works next Wednesday.

The Attorney General's office moved to the St. Paul Place complex in 1989, where it is the largest tenant in the 280,000-square-foot building.

Even with the old Attorney General lease, the building was a near-casualty of the recession. Mr. Kornblatt sought bankruptcy court protection for the building in 1991, before a successful restructuring of its debt and several leases with federal agencies allowed the partnership that controls the building to emerge from Chapter 11 last year.

Martin W. Walsh Jr., secretary of the Department of General Services, said the rent cuts will be phased in to help Mr. Kornblatt's partnership make debt payments.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.