Harbor office center being sold at a loss Candler Building is up for sale at $22 million

it cost $60 million

A third of it is unrented

GE decides to sell largest office building in a weak city market

January 13, 1996|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

An affiliate of the General Electric Co. intends to sell downtown's largest office building after 10 years of ownership, a move that will recoup only a fraction of its $60 million investment.

GE Investments Corp.'s decision to sell the 12-story Candler Building is perhaps the largest in a series of signs spotlighting the slow, continuous deterioration of Baltimore's office market.

Among major cities, Baltimore ranks as one of the worst performers in regards to its white-collar job growth and the occupancy rate for office space, according to recent studies by Lehman Bros. and Morgan Stanley & Co.

In the case of the Candler Building, its nearly one-third vacancy level far outpaces that of the city at large, where just over a fifth of all office space is dark.

At the same time, the weak market has taken its toll on rental rates and property values, driving both downward by roughly 30 percent since 1989.

In 1993, for instance, GE Investments successfully appealed its $50 million property tax assessment, resulting in a 32 percent reduction, according to state records.

"GE respects the fact that Baltimore's central business district isn't as dynamic or vibrant a market as others, but I think they feel that it's an opportune time to sell because of their tenancy and location in the Inner Harbor," said Philip C. Iglehart, the Colliers Pinkard principal that GE has retained to sell the building.

Despite the 111 Market Place building's perceived quality and strong tenant roster -- which includes Alexander & Alexander, the Johns Hopkins University and the former Maryland National Mortgage Corp. -- GE Investments is unlikely to generate a favorable return from a Candler sale.

The investment arm of the Connecticut-based conglomerate paid roughly $40 million to purchase the 85-year-old property in 1986, and then spent $20 million to upgrade the property in one of the most ambitious renovations ever undertaken in Baltimore.

The 535,000-square-foot building is on the market for $22.8 million. GE Investments hopes to complete a transaction by mid-year.

"There are just too many options in downtown Baltimore, and that's why it's never been as successful as it could have been," said Richard P. Manekin, CB Commercial Real Estate Group senior vice president and head of the Los Angeles-based brokerage firm's local operation.

Mr. Manekin said the loss of traditional city-based operations centers to the suburbs has exacerbated the problems of buildings such as the Candler.

T. Rowe Price Associates last month confirmed plans to purchase land in Owings Mills to develop 500,000 square feet of new office space for its operations center, after similar decisions by financial houses Signet Bank/Maryland, Alex. Brown Inc. and Provident Bank of Maryland.

Still, the Candler Building may be poised to recover, thanks to a mini-renaissance about to take place around Market Place.

Within the next two years, for instance, the Christopher Columbus Center, Metropolis at the Power Plant and the Port Discovery children's museum in the derelict Fishmarket are all expected to either reopen or be fully operational.

"I think we'll attract a nice mix of institutional and entrepreneurial interest in the project," Mr. Iglehart said. "GE is motivated to dispose of the asset, the price is reflective of that, and there are a number of buyers who look for upside potential."

Named after Asa G. Candler, the founder of the Atlanta-based Coca-Cola Co., the Candler Building was one of three primary Coke offices and distribution points after its completion in 1911.

In the 1960s, the building was sold to Chatillon Realty Corp., a New York investment firm, and served as the corporate headquarters for Jos. A. Bank Clothiers.

The clothier relocated to Owings Mills after GE Investment's purchase, however.

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