Alex. Brown skyscraper sold for $80 million City's newest tower is 3rd major building to be sold in a year

Investment firm to stay

March 13, 1998|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

A New York investment firm has purchased the 30-story Alex. Brown Building for roughly $80 million, continuing the interest by out-of-town investors in downtown Baltimore's signature office towers.

Blackstone Group's purchase of the skyscraper at 1 South St. was the third major central business district property to change hands in a year. The others were 100 E. Pratt St. and 250 W. Pratt St.

"I think this is simply another strong indication of the rebound of the real estate market and investment grade properties in the region and the central business district," said Robert A. Manekin, president of Casey & Associates Inc., a leading local real estate firm.

But in the case of the Alex. Brown Building, the Blackstone

purchase caps a turnaround for the $90 million tower, which sat largely vacant earlier this decade, the victim of the worst commercial real estate depression since World War II.

Today, the 450,000-square-foot building is nearly full. Roughly 60 percent is occupied by the investment firm BT Alex. Brown Inc., which is committed by a lease to remain in the city's newest skyscraper through 2012. The company's lease of 12 floors is valued at about $88 million.

"In retrospect, I think we did damn well, and I'm proud of the way things turned out," said Kevin McAndrews, president of McAndrews Realty Advisors and a former executive at Harlan Co. Inc., which built the skyscraper in 1991.

"It's a great building for Alex. Brown, and we didn't cut any corners, which is ultimately why the building is successful," he said.

Blackstone, a private investment bank founded in 1985, controls roughly $4 billion in real estate assets in the United States and Europe.

The company declined to comment on the transaction.

The Alex. Brown Building is the latest in a series of recent regional real estate acquisitions by Blackstone.

Earlier this month, Blackstone bought the Investment Building in Washington, D.C. It plans to renovate the 1924 building, increasing its space to 400,000 square feet.

For Harlan/KDC Associates, the owners of the Alex. Brown tower, the sale to Blackstone ends a decade of involvement in Baltimore real estate. Harlan/KDC Associates is a joint venture between the Harlan Co. Inc., a New York developer, and a Kajima Development Corp., an arm of a Japanese construction company.

Leonard Harlan, president of Harlan Co., said the timing of the sale stemmed primarily from a heightened level of investor interest.

"The building was leased up, and it was time to move on to other things," Harlan said. "In the real estate business, there are ups and downs, and we're pleased to have survived a deep cycle and maintained the integrity of the building."

At least part of Harlan/KDC's motivation to sell came from its Japanese lender, whose debt on the project came due last summer, sources said. Harlan declined to comment on the building's debt.

The Alex. Brown Building becomes the third high-profile, Class A downtown skyscraper to be sold to out-of-town buyers in the past year.

A Boston real estate investment trust in October acquired the 28-story office tower at 100 E. Pratt St. for a record $137 million.

Like the Alex. Brown Building, the 650,000-square-foot 100 E. Pratt St. is almost fully leased -- to T. Rowe Price Associates Inc., IBM Corp., Merrill Lynch & Co. Inc., Prime Retail Inc. and others.

The other major downtown office tower sold was 250 W. Pratt St.

TrizecHahn Corp. of Toronto bought the debt on the property from a New York pension fund adviser. The roughly $51 million price tag was in contrast to five years ago when the mortgage on the 26-story building went for $22 million.

More sales of downtown office buildings are likely.

In January, the Washington owners of the 12-story Candler Building offered the building for sale at $65 million, the result of renewed investor interest. A deal for the 535,000-square-foot building is likely before June.

Pub Date: 3/13/98

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