McLean or her husband asked heads of several agencies to rent building

December 11, 1993|By Kim Clark and JoAnna Daemmrich | Kim Clark and JoAnna Daemmrich,Staff Writers

Baltimore Comptroller Jacqueline F. McLean or her husband asked the heads of several city agencies to rent the family's vacant office building at 12 W. Montgomery St., a City Hall official confirmed last night.

Clinton R. Coleman, spokesman for Mayor Kurt L. Schmoke, said the mayor had learned that "one of the McLeans" had asked staffers of the Baltimore Development Corp., the city agency that oversees downtown development, if they were interested in renting the Federal Hill building.

Mr. Coleman said other city officials were also approached before the city Health Department agreed to rent the building. But he did not identify the other agencies.

Also yesterday, it became apparent why the McLeans were so eager for the city lease.

Several real estate experts said that the Health Department lease Mrs. McLean slipped past top city officials would have boosted the selling price of their building by more than $200,000. Otis Warren Jr.'s offer of $650,000 for the former headquarters of the McLean's travel agency was reasonable only because of the long-term, ironclad lease offered by the Health Department, appraisers and realty agents said. Without a lease, the building might not be salable at all.

"Nobody has wanted to buy a building like that in a year and half," said Timothy R. Hearn, senior vice president of MacKenzie O'Conor Piper & Flynn, a regional real estate company with offices in Baltimore.

The McLeans badly needed a quick and lucrative sale of the building, the former headquarters of their defunct travel agency.

According to legal documents, the McLeans faced a Development Credit Fund lien of $341,681, bills from the Airline Reporting Corp. for nearly $112,000 in airline tickets and $21,000 in unpaid rent for a former Four Seas & Seven Winds Inc. office in Milwaukee. The McLeans did not return phone calls asking for comment yesterday.

The lease -- and Mrs. McLean's apparent efforts to sidestep a review by city officials -- are the subject of a grand jury investigation by Maryland's special prosecutor.

The lease called for the geriatric nursing service to move from rent-free offices at Montebello Rehabilitation Hospital to the McLeans' building, on a 10-year lease with an annual rent of more than $106,000.

The Board of Estimates approved the lease Oct. 27, but revoked it a month later, after learning that the McLeans owned the building.

Mrs. McLean failed to reveal her financial interest in the building to the board, which approves all city contracts, and voted for the lease.

Mr. Warren, a prominent local real estate developer, said yesterday that James McLean told him he needed to raise at least $550,000 from the sale of the building.

Mr. Warren offered $650,000, or the appraised value of the building, whichever was lower. The top price was the most that could be justified with the city lease, he said.

Mr. Warren said he offered to buy the building because he wanted to help out financially troubled friends without making a bad business move. "I didn't want to take advantage of them and I didn't want them to take advantage of me."

Mr. Warren withdrew his purchase offer because of the growing controversy over Mrs. McLean's role in obtaining the city lease for the building. "I don't want to be related to anything that isn't kosher," he said. "My name is all I have."

Local real estate experts said an appraiser may very well have backed Mr. Warren's top price, but only because the long-term city lease would cover a mortgage of about that size.

Gordon C. Gilbert Jr., a Baltimore appraiser, said the building would probably not be worth that much if the same lease had been offered by a business. Government agencies are considered among the safest tenants because they never go out of business and their checks don't bounce, he said. The $H McLeans would be lucky to sell the vacant building, even at a discounted price, within a year, Mr. Hearn said. With vacancy rates so high in the Baltimore area, banks are refusing to grant mortgages for empty commercial buildings, he explained.

Finding another tenant to make the building more salable will be difficult, Mr. Hearn said. More than one-fourth of all similarly rated offices and buildings in Baltimore are empty, he said.

As previously reported, Mrs. McLean, the city's third most powerful elected official, is under investigation by city ethics officials and State Prosecutor Stephen Montanarelli for her role in obtaining the city lease on her family's building.

Mrs. McLean has acknowledged she made a mistake in not disclosing her family's stake in the building while seeking city approval. She has said that because the lease was with Mr. Warren, who planned to buy the building, she believed there was conflict of interest.

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