One Calvert Plaza is latest casualty ONE MORE FORECLOSURE

October 25, 1994|By Kevin L. McQuaid | Kevin L. McQuaid,Sun Staff Writer

One Calvert Plaza became the latest casualty of the city's Class B office market decline yesterday when lender Principal Mutual Life Insurance Co. took possession of the 16-story building at a foreclosure auction for $4.1 million.

The auction price represents a 50 percent discount off the debt secured by the 201 E. Baltimore St. building, and it serves as a prime example of the re-evaluation of downtown's older properties.

The 125,729-square-foot building also becomes the fourth major Class B property to fall to a lender, joining a list that includes the 10-story Equitable Building at 10 N. Calvert St. and the two-building Redwood Center. Principal Mutual also controls the nine-story 117 Water St., which it assumed in June 1993 after the previous owner defaulted on a $5.2 million mortgage.

"It's a trend, unfortunately, that speaks directly to a matter of supply and demand," said David W. Kornblatt, chairman of the Kornblatt Co., which owns the 28-story St. Paul Plaza office tower and who attended the auction.

More than any other commercial real estate segment in the Baltimore area, Class B buildings -- defined as 25 years or older, with little or no parking or amenity packages enjoyed by their newer counterparts -- were stung by the collapse of the market four years ago.

Even today, Class B vacancy rates hover at 25 percent while most areas have recovered to 15 percent, a figure that has sent rental rates downward and caused landlords to search in vain for tenants.

Some landlords, faced with the downward spiral, have abandoned the search. Late last month, Laurel-based Orion Construction Corp. purchased the American Building at auction for $260,000 from Henry J. Knott Sr. The 14-story, 231 E. Baltimore St. building had been appraised prior to the sale at $1.2 million.

In the case of One Calvert, its vacancy rate has stood at nearly 40 percent for much of the past year, according to statistics compiled by Realty Information Group, a Bethesda firm that tracks market data.

Its key tenants include consultants Willse & Associates and law firms Freishstat & Sandler and Herwig & Humphreys.

One Calvert defaulted on its $8.2 million mortgage in August, according to a lawsuit filed earlier this month in Baltimore City Circuit Court. With interest, the debt on the former Mercantile Trust Building had risen to $8.63 million.

By comparison, the state last assessed the building at $3.75 million, records indicate.

The default came after Principal Mutual had restructured the July 1986 mortgage with the former owner, a partnership led by Benjamin D. Geller and Herbert C. Klein, nearly four years ago.

One Calvert Plaza was completed in 1901 and was one of the few downtown buildings to survive the Great Baltimore Fire three years later. After Mr. Geller's 1982 purchase, he borrowed more than $6 million to restore the property.

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