Blue Cross seeks to cut realty costs

March 14, 1995|By Kevin L. McQuaid | Kevin L. McQuaid,Sun Staff Writer

Blue Cross and Blue Shield of Maryland is in the final stages of selecting a firm to help trim its real estate expenses, the state's largest health insurer acknowledged yesterday.

The selected firm will be charged with saving money for Blue Cross by renegotiating existing leases, selling and buying property and negotiating new leases, according to a request for proposals sent to area real estate firms by Blue Cross.

Although the scope of the plan has yet to be determined, any big moves by Blue Cross could send ripples through the area's commercial property market. The insurer has more than 30 locations statewide totaling roughly 1.2 million square feet -- a figure roughly equivalent to four 15-story downtown office towers.

"The company is reviewing its leases and space requirements to more efficiently maximize the use of properties it either owns or leases," said Linda D. Wilfong, a Blue Cross spokeswoman. "We feel it's prudent to have an effective plan in place to reduce operating expenses."

The company's selection process, set against a backdrop of job cuts and consolidation, marks the latest step in its continuing efforts to trim more than $162 million in annual administrative costs.

In the past six months, for instance, Blue Cross has announced plans to eliminate nearly 600 employees from its payroll, which now stands at 3,400, down about 15 percent from two years ago.

Earlier this month, Blue Cross -- which recently reported operating profits gained 40 percent in 1994 to $60 million on revenues of $1.9 billion -- narrowed its search to three area real estate firms, including Manekin Corp., Colliers Pinkard and MacKenzie/O'Conor, Piper & Flynn Commercial Real Estate Services. A decision is expected within the next month.

"They are faced with the same downsizing trend that every organization is grappling with these days," said Donald A. Manekin, a Manekin Corp. senior vice president. "They're doing what they have to do to make the organization lean and mean to be competitive."

The real estate firm's contract also is expected to involve formulating a plan for Blue Cross' future real estate needs and subleasing at least a portion of Blue Cross' rented space to others, as further consolidation is undertaken.

Ms. Wilfong declined to comment on the possibility that Blue Cross would attempt to sublet floors in its two-building headquarters complex in Owings Mills, where the insurer is on a long-term lease with the Rouse Co., or how much Blue Cross intends to save through real estate consolidation.

Rouse completed the nine-story and seven-story buildings in 1989 and 1990. Blue Cross and its affiliates also occupy large blocks of space downtown and in Columbia.

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