A company in search of a home

January 26, 1995|By Kevin L. McQuaid | Kevin L. McQuaid,Sun Staff Writer

In the wake of USF&G Corp.'s recent decision to move from downtown, attention once again has turned to Alex. Brown Inc., as the 195-year-old investment firm searches the region for a new headquarters.

And for those who know Alex. Brown, they know to direct all eyes on its steely chief executive, A. B. "Buzzy" Krongard.

Currently scattered in six locations downtown, Alex. Brown has been working for the past year on a plan to fold its diverse operations -- involving nearly 800 workers -- into a single site. With the company searching to consolidate its 250,000 square feet of office space, it represents one of the biggest commercial real estate decisions to affect downtown in years.

The frustration for the real estate community and city officials is simple: no one's talking -- especially not Mr. Krongard, the ex-Marine who is almost single-handedly leading his company's negotiations.

All that these property owners and managers know is that they have submitted -- or will submit -- proposals. What they don't know is who will win.

In public statements, Mr. Krongard has said he doesn't rule out the possibility that Alex. Brown could move out of the city to one of the surrounding counties. He also has said he is looking at a number of buildings downtown. Both contain qualities attractive to the firm, yet neither has all the elements it wants or needs.

Adding to the tension of the high-stakes poker game is the city's moribund commercial real estate market. (It was further devastated last week when insurance giant USF&G Corp. confirmed plans to move its offices out of the 35-story 100 Light St. tower and into its half-empty complex in Mount Washington.) The soft market means that even if Alex. Brown decides to build a new headquarters -- a lengthy process that could extend beyond March 1997 when its lease expires -- the firm could easily sign some short-term lease renewals in the meantime.

In essence, Mr. Krongard is holding all the cards. And he isn't tipping his hand.

"We're continuing to explore any and all alternatives," Mr. Krongard said yesterday, echoing a refrain he has maintained for months. "There's a calculus here, with so many moving parts, and right now we're just trying to whittle down some of those parts."

So far, Mr. Krongard appears to be focusing on two buildings downtown: the 25-story Bank of Baltimore Building (of which Alex. Brown is an occupant and part-owner) and the 30-story Commerce Place, Baltimore's newest skyscraper, which is roughly 75 percent vacant.

Mr. Krongard plans to move the process forward next week, the deadline to receive what he called "information" that will affect his decision. He would not elaborate.

But he appears to recognize that time is on his side. The most obvious choice, the Bank of Baltimore, where the firm now occupies 80,000 square feet, has not even been a party to the negotiations.

"We've not talked seriously to them as yet, but ultimately we would expect to have the opportunity to keep them," said Richard M. Alter, president and chief executive of the Manekin Corp., the Bank of Baltimore Building's general partner.

What is known is that about three months ago, Mr. Krongard offered the owners of the 450,000-square-foot Commerce Place -- a team made up of the New York-based Harlan Co. Inc. and Kajima Development Corp. of Japan -- a deal valued at roughly $15 per square foot, sources said. But Harlan-KDC Associates rejected the below-market offer, which failed to include costly tenant improvement allowances, and is working on a counteroffer.

"There are discussions, but we're nowhere close to a deal," said Kevin F. McAndrews, a Harlan managing director. "Clearly he's got some leverage. But while there's a psychological element to this, especially with USF&G fresh in everyone's mind, the reality remains the same, that they have a facilities decision to make which will incorporate a number of factors."

Whether to strengthen his negotiating position or simply to expand the firm's horizons, Mr. Krongard has told city officials he also is focusing on a site in the Owings Mills section of Baltimore County for the location of a new building.

TC "Baltimore County has several good sites, and the [BWI] airport area has both land and buildings around it," Mr. Krongard said.

Yet various prominent land owners in Owings Mills said they have not been approached by Alex. Brown, and the county's economic development office added they have had little contact with the firm.

The county in many ways offers what Mr. Krongard has said are the most important factors: Parking, security and ambience.

"Theirs is a business that the notion of a marketplace is essential, and I think they recognize that and will stay in the downtown marketplace," said J. Joseph Clarke, president of Clarke Enterprises Inc., who is representing Capital Guidance Corp. in its planned office development at One Light Street downtown.

But economics may ultimately decide the matter.

"Cost is extremely important to us, no question," Mr. Krongard said.

Because it potentially offers the best deal economically, the 26-story Signet Tower downtown is also being evaluated by Alex. Brown -- both because of the building's available space and because, like the Bank of Baltimore building, an Alex. Brown affiliate owns a portion of it.

Although USF&G's tower remains in contention because of the 375,000 square feet coming available there, real estate analysts believe it represents a remote possibility for Alex. Brown because of the building's small floor plates.

In August, Alex. Brown began considering the derelict Power Plant at Pier 5, in part because the failed indoor theme park is one of the only downtown structures containing enough floor area for a suitable trading floor for stockbrokers.

But that option has diminished in recent months after a study determined it would cost as much as $40 million to renovate.

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