Yarmouth to acquire tower debt

October 31, 1994|By Kevin L. McQuaid | Kevin L. McQuaid,Sun Staff Writer

NEWARK, N.J. — The Yarmouth Group Inc., one of the nation's largest commercial real estate investors, has emerged as the victor in a contest to acquire the debt on the 26-story 250 W. Pratt St. office tower, according to people familiar with the transaction.

Yarmouth's anticipated $32 million purchase of the skyscraper's mortgage from Apollo Real Estate Investments Ltd. Partnership would represent the largest downtown real estate transaction of the year.

The purchase also would signal optimism about the city's office market at a time when many institutional investors have ignored Baltimore, and foreclosures involving projects such as One Charles Center and The Equitable Building have been the norm.

By comparison, the only other notable downtown office deal of 1994 involved Legg Mason Inc.'s $5.3 million purchase of debt on its former 20-story headquarters at 7 E. Redwood St.

The debt transaction is significant because it would essentially give Yarmouth, a New York pension fund adviser with more than $7 billion in assets under management, control of the 357,112-square-foot building.

"We've been asked to consent to the transfer of the mortgage, and as of right now we have no objections," said John A. Pirovano, president of Cabot, Cabot & Forbes Inc., the Boston development firm that owns the tower.

"Obviously with something of this magnitude, the lender has great control, but we own and will continue to own the real estate."

Yarmouth officials would say only that they were considering a Baltimore deal.

"We are looking at some properties there, but we're not going to deny or confirm that that building is among them," said Ed Meyer, a Yarmouth senior vice president. "We're not in a position to comment. Our policy is not to comment until deals are done."

The decision to sell the debt to Yarmouth comes after months of marketing by Apollo, a division of the $4 billion New York merchant bank that acquired the debt at a deep discount from Chase Manhattan Bank last year, and its adviser, New York investment house Oppenheimer & Co.

NB For Apollo and its Washington partner Bailey Realty Corp., the

sale would generate a 44 percent return on its $22.25 million investment in less than 15 months.

Cabot, Cabot & Forbes had borrowed $56 million from Chase Manhattan to develop the building in 1985, according to city records.

Despite Yarmouth's price for the debt, Cabot, Cabot & Forbes' mortgage payments will continue to be based on the $56 million, Mr. Pirovano said.

Settlement on the purchase is expected to occur in the first quarter of 1995.

Last week, Yarmouth officials were in Baltimore interviewing local firms to provide leasing and management of 250 W. Pratt after the purchase. The building is currently managed by Bailey, which took control of that aspect of the building from Cabot, Cabot & Forbes as part of the December 1993 purchase.

The 250 W. Pratt St. tower is 93 percent committed to tenants such as law firm Semmes, Bowen & Semmes, commercial real estate brokerage firm CB Commercial Real Estate Group, investment firm Dean Witter, the U.S. General Services Administration and BGE subsidiary Constellation Holdings Inc.

In all, the building's annual rents exceed $8 million.

The building's loan would mark the first area purchase by Yarmouth, which recently acquired a 36-story office property in downtown Philadelphia for $78 million as part of a push to invest capital provided by corporate and public clients.

Roughly half of Yarmouth's 100-property portfolio containing 40 million square feet nationwide consists of office buildings, including six in Washington, Mr. Meyer said.

Yarmouth planned to invest $200 million in new real estate assets nationwide in 1994, according to a survey of institutional investors published late last year.

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