Sun nearing deal to sell office to Hopkins unit $10 million transaction would allow newspaper to lease back space

September 26, 1996|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

The Baltimore Sun Co. has signed an agreement with an affiliate of the Johns Hopkins Institutions that is expected to lead to a sale of the newspaper's Calvert Street offices and an adjacent garage for roughly $10 million.

If the negotiating agreement with Hopkins' real estate affiliate Dome Corp. reaches fruition, the publisher of The Sun and 900 downtown employees will commit to remain at 501 N. Calvert St. -- its offices since just after World War II -- through 2011.

Instead of occupying the entire building, however, The Sun plans to lease four floors, or 150,000 square feet of office space. Both Sun executives and Dome officials declined to reveal financial terms of the pending transaction.

In exchange, Dome would invest an estimated $10 million to renovate the two six-story buildings, with an eye toward introducing ground-floor retail space and upgrading heating, air conditioning, elevators, office and common areas.

"The Dome proposal solves most if not all of our real estate problems," Mary E. Junck, publisher and chief executive officer of The Baltimore Sun Co., said yesterday.

The Dome proposal for 501 N. Calvert St. comes as newspaper companies nationwide are struggling with older, often functionally obsolete office space and decisions about whether to abandon those structures in favor of costly new facilities.

Earlier this year, for instance, The Sun offered to lease or sell its properties to the state for $20 million in an attempt to shed excess space and reduce operating costs.

"Owning and managing real estate is not what newspaper companies do as a primary focus of their business," said Mary Anne Kanter, chief financial officer of the Newspaper Association of America, a Reston, Va.-based trade group. "So it makes a lot of sense. It's a way for papers to avoid outlaying a lot of capital to renovate properties that often times are in desperate need of renovations."

The Sun presently occupies just 40 percent of its 440,000-square-foot building on Calvert Street, which was completed in 1949 and substantially renovated and expanded in 1980. The building, recently appraised at $14 million, requires in excess of $3 million annually to operate.

In recent years, the newspaper's space needs have contracted resulting from the opening of a $171 million printing plant in Port Covington, the closing of The Evening Sun and staff downsizing.

"From the perspective of doing a combined redevelopment and construction project, The Sun's buildings fit nicely into our expertise," said Lester R. Conley, Dome Real Estate's president. "We think it's an outstanding situation with a substantial opportunity to improve an anchor property in the Mount Vernon area of the city."

Dome intends to attempt to lease the balance of the office space to other Johns Hopkins affiliates.

Both sides acknowledged that many of the details of the agreement and subsequent two-year renovation have yet to be decided, however.

"We think there will be a modest savings and greatly increased operating efficiencies," said Jean C. Halle, a Baltimore Sun Co. vice president and its chief financial officer. "We don't have hard numbers yet because we just aren't at that stage. But we are confident that at the end of the day we won't have a plain vanilla space, we'll have space that is an exciting environment that's right for us."

Halle added both sides hope to complete a sale of 501 N. Calvert and the adjacent 650-car parking garage at 601 N. Calvert St. in January.

Neither Halle, Conley nor Sun real estate consultant Miller Corporate Real Estate Services would discuss specific terms of the transaction, including lease rates, renovation costs or potential savings to the newspaper.

For Dome, The Sun's buildings would mark the latest in a long line of renovation projects.

The development company has reinvigorated the Henderson House apartments near Penn Station and is currently working to rehabilitate the former Eastern High School.

Pub Date: 9/26/96

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