IBM to sell skyscraper for record $137 million Boston Properties to buy 100 E. Pratt St.

October 17, 1997|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

IBM Corp. is expected to sell its 28-story skyscraper at 100 E. Pratt St. by the end of this month for roughly $137 million, a record price for a downtown Baltimore office project.

The anticipated acquisition of the office tower by Boston Properties Inc. would represent the height of the region's four-year office market recovery, local commercial real estate analysts said.

Although the high-water mark stems from rising rents and the strength of white-collar job growth in Baltimore, analysts said the project's location across from the Inner Harbor, combined with its size and age, contributed to the sale price.

"It's in the prime location downtown with an architecturally winning design," said J. Joseph Casey, chairman and chief executive of Casey & Associates Inc., a Baltimore real estate firm. "While it may indicate a strong interest in downtown and that the market is firming up, I doubt you'll see a price that high anytime soon relative to 100 E. Pratt St., because it's such a unique opportunity."

The 100 E. Pratt St. office tower -- headquarters to T. Rowe Price Associates Inc., Prime Retail Inc. and F&G Life Insurance -- is one of downtown's largest office buildings and one of its newest. IBM and T. Rowe Price five years ago completed an addition of office and retail space and a 940-space parking garage that nearly tripled the size of the 10-story office building.

At the time the addition was completed, few analysts would have predicted that 100 E. Pratt St. -- or any other downtown office project -- would fetch more than $100 million, much less $137 million. That's because in the wake of the early 1990s recession, downtown office vacancies soared and more than one-quarter of all office space downtown sat empty, causing building values -- and tax assessments -- to plummet.

But since then, Inner Harbor office buildings have recovered dramatically.

"We think it's really the key office location in the city," said Abraham Rosenthal, Prime Retail's chief executive. "It's centrally located, and it has all the amenities, like a health club, quality restaurant, conference facilities and terrific views."

The only other nine-figure commercial real estate sale in Baltimore history came in 1984, when a New York investment group spent $100 million to purchase the 35-story USF&G Tower at 100 Light St., which was then the insurer's headquarters.

The acquisition of the 650,000-square-foot, fully leased 100 E. Pratt St. building will mark the first in the Baltimore area for Boston Properties, a real estate investment trust led by U.S. News & World Report Chairman Mortimer Zuckerman. The company also owns Democracy Center, a 680,000-square-foot project in Bethesda.

"They've articulated a strategy to be focused geographically, and Baltimore isn't a stretch at all from [Washington] D.C., where they have holdings already," said J. David Kelsey, a Bear, Stearns & Co. analyst who tracks Boston Properties. "Traditionally, they've been a developer of Class A-tier properties, and the asset in Baltimore seems to fit in with their portfolio."

Neither Boston Properties, IBM nor Colliers Pinkard, the Baltimore real estate firm retained by the Armonk, N.Y., computer giant to sell 100 E. Pratt St., would comment on the sale.

But the deal comes amid a wave of purchases for 27-year-old Boston Properties, which recently went public with a $785 million stock offering. Since the stock offering in June, for instance, the REIT has spent $527 million to buy two midtown Manhattan office projects. The company also has expressed interest in acquiring Prudential Center in Boston, a complex expected to fetch as much as $1 billion.

"They went public as a way to access capital and expand their portfolio," said Keith Pauley, a managing director of LaSalle Advisors Inc., a Baltimore-based pension fund consultant that owns 335,600 of Boston Properties' shares. "I wouldn't be surprised to see them more active in Baltimore."

The 100 E. Pratt St. deal won't be Boston Properties' first involvement with a major local property, though. Four years ago, the company led a joint venture that developed the $126 million headquarters of the U.S. Health Care Financing Administration in Woodlawn. Boston Properties no longer owns that four-building complex.

In all, Boston Properties controls 77 office, industrial, hotel and garage properties in New York, Boston and Washington.

Downtown office sales over $5 million since October 1994

Building, Price*, Seller, Buyer, Date

100 E. Pratt St., $137, IBM Corp., Boston Properties, 10/97

One Charles Center, $6, MetLife, Peter G. Angelos, 11/96

Blaustein Building, $8.5, American Trading Real Estate, BGK Equities, 8/96

Candler Building, $21.8, GE Investment Corp., Meridian Group Inc., 8/96

NationsBank Center II, $8.5, Resolution Trust Corp., Biltmore Holdings Corp., 4/95

250 W. Pratt St., $32, Apollo Real Estate Investments, The Yarmouth Group Inc., 12/94

* -- In millions

Pub Date: 10/17/97

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