BGE unit to put headquarters in Candler Building 2nd major lease there in a month

Commercial real estate

November 04, 1997|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

Baltimore Gas and Electric Co.'s electric power marketing subsidiary intends to establish its headquarters downtown in the 12-story Candler Building, part of a push by the utility company to diversify into new businesses and compete nationally.

Constellation Power Source's plan to move to the 111 Market Place building by March represents the second major office lease at Candler in the past month, after Sierra Military Health Services Inc. committed to create a regional headquarters with 330 employees there.

Constellation Power Source's 38,000-square-foot lease also represents one of the largest office leases downtown this year. The lease for the fifth floor in the building is valued at roughly $5.7 million through 2008.

"They liked the location primarily," said Bruce Lane, a partner in the Meridian Group Inc., a Washington investment firm that bought the 86-year-old Candler Building in August 1996 for $21.8 million. "With other buildings, they would have been farther from the Inner Harbor, and they would have had to spread out over multiple floors. For a trading operation, communication is very important, so being on one floor makes a huge difference."

Constellation Power Source, a joint venture between BGE and Goldman, Sachs & Co., plans to begin operating in Candler with just under 200 employees, a BGE spokeswoman said.

When the company unveiled the subsidiary in February, it said Constellation would invest more than $100 million in technology and equipment to establish a headquarters.

Together, BGE and Goldman, Sachs hope to capture at least a slice of the $300 billion-a-year pie selling energy and related services to other utilities and municipalities. Currently, 10 firms control about 75 percent of the market.

The BGE subsidiary selected Candler, it said, because the building is one of the few large enough to house a Wall Street-type securities trading floor, which Constellation requires. Prior to signing a lease with Candler, BGE had considered a former Alex. Brown Inc. trading floor in the Crestar Bank Building.

The 535,000-square-foot building was originally a Coca-Cola Co. warehouse. In the mid-1980s, the General Electric Co. converted it to office space at a cost of $40 million.

Constellation Power Source's deal will bring Candler's occupancy to 95 percent, its highest level in more than a decade, said L. Bruce Matthai, a principal at Colliers Pinkard, the Baltimore real estate firm responsible for marketing the project for Meridian.

The Constellation Power Source deal will also further squeeze downtown tenants searching for large blocks of space, and inflate downtown leasing results for 1997.

Combined, for instance, Sierra and Constellation Power Source total 121,000 square feet. Typically, about 150,000 square feet of downtown office space is removed from the market each year.

Candler's increased occupancy leaves only three major buildings downtown with blocks of space larger than 50,000 square feet: The 28-story Legg Mason Tower, the 22-story One Charles Center and the Crestar Bank Building.

Pub Date: 11/04/97

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