USF&G to leave downtown

January 20, 1995|By David Conn | David Conn,Sun Staff Writer Sun staff writers John E. Woodruff, Eric Siegel and Brad Snyder contributed to this article.

USF&G Corp., the Baltimore insurer whose 35-story office tower helped spark the Inner Harbor renaissance more than 20 years ago, has decided to leave downtown and consolidate its offices in Mount Washington.

In a cost-cutting and corporate efficiency effort, the company said yesterday that all 767 employees in the building will join the 1,265 people who work at USF&G's Mount Washington Center, which straddles the Baltimore city-county line.

USF&G Chairman and Chief Executive Norman P. Blake Jr. said the company has "no issue with Baltimore, and with the community of Baltimore. . . ."

"Our campus there [in Mount Washington] is half in the county and half in the city, and two-thirds of the people actually would be in the city," he said.

At a time when Baltimore is struggling with continued flight to the suburbs and the aftereffects of the recession, the loss of hundreds of workers and a corporate headquarters is a huge economic and psychological blow to downtown.

The fact that it's USF&G Corp., the first big company to commit to the Inner Harbor during its redevelopment, makes the move especially bitter to downtown boosters.

"This move is a symbol of the difference between the corporate commitment to the city that existed at that time and what exists today," said Robert C. Embry Jr., who was city housing commissioner through the formative years of the Inner Harbor project.

"The lack of corporate leadership and commitment to the city, in many quarters, is a shame," said Mr. Embry, now president of the Abell Foundation.

The move from Baltimore's tallest building (not counting the 100-foot spires on the William Donald Schaefer Tower and the NationsBank Building) will begin in five or six months and take up to two years to complete, the company said. After some departments are reconfigured, the 565,000 square feet in Mount Washington will accommodate the tower employees without any new construction. USF&G also employs 265 people in an Owings Mills servicing center.

The 100 Light St. tower may get filled ultimately. "But that's not the point," Mr. Embry said. "Any tenant they get will most likely come from another downtown building, and the point is that there will now be 700 fewer people working in the Inner Harbor."

USF&G officials would not comment yesterday on any talks they've had with city officials.

Mayor Kurt L. Schmoke said that he has discussed the issue several times with USF&G officials over the past two years and was scheduled to meet again with company officials today.

"I would prefer not to comment until after that meeting," he said through a spokesman.

For merchants and restaurants downtown, the move means fewer shoppers and lunchtime customers. John Vatenos, manager at nearby Burke's restaurant and bar, likened the move to the cancellation of the 1994 baseball season. "The restaurant will survive," he said. "The waiters and the waitresses and the cooks, they're the ones that are hurt the most."

USF&G, which recently emerged from a painful restructuring, said the move is intended to bring greater efficiency to the property/casualty insurer and to save money. To help pay for the move, the company will take a $190 million charge against its earnings in the fourth quarter of 1994, which ended Dec. 31.

The charge represents the acceleration of lease payments the company would have made through 2009, when the lease expires. Though USF&G built and originally owned the tower, it was sold to a partnership in 1984. The current owner is Marbax Associates of New York, although USF&G still owns the ground.

As part of the 1984 agreement, the company negotiated a lease for 350,000 square feet in the 530,000-square-foot tower that included steadily rising rents. Last year USF&G paid an average of $53 a square foot for its space, according to Mr. Blake. That is more than 2 1/2 times the going market rate downtown.

"We've gone through quite a real estate slump," said Chief Financial Officer Dan L. Hale. "So there's a huge difference in perception between rents back then and today." USF&G owns its buildings in Mount Washington.

Because it will no longer occupy the tower, accounting rules require the company to take the $190 million charge. But it expects to recoup about $70 million as it subleases the space until 2009, Mr. Hale said.

USF&G has an enormous job ahead in leasing the space -- 350,000 square feet is almost 20 times the largest single real estate move downtown last year.

One prospect could be Alex. Brown Inc., which has made clear its desire to find new space; officials at the Baltimore brokerage and investment bank could not be reached for comment yesterday.

"Over a couple of years, and beyond, based on expressions of in

terest, we feel very confident about" filling the space, Mr. Hale said.

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