Crestar tower set for auction Calvert-Baltimore unable to pay debt on downtown building

$51.4 million due on loan

Owners still in talks with lender to avert foreclosure

Commercial real estate

July 17, 1998|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

Hit by the loss of a major tenant and a shift of the city's central business district, the Crestar Bank Building has been scheduled for foreclosure auction next month.

The inability of the owners, Calvert-Baltimore Associates, to pay their $51.4 million debt on the 25-story tower comes amid one of the hottest commercial real estate markets in Baltimore's history and underscores the fragility of downtown's office market, analysts said.

Teachers Insurance and Annuity Association (TIAA), the New York pension fund that lent the developers money to construct the 120 E. Baltimore St. tower in the late 1980s, is to auction the building Aug. 19.

"TIAA needed to take this action to protect our interests, because the loan is in default," said Claire Sheahan, a spokeswoman for the association, a pension fund for educators that has more than 2 million participants and $236 billion in assets.

Calvert-Baltimore officials said talks with the lender to reach an agreement that would avert the sale were continuing.

If the auction occurs, it will mark the first major downtown office foreclosure since August 1993, when Metropolitan Life Insurance auctioned the One Charles Center tower after a group controlled by Chicago financier Samuel Zell failed to keep its mortgage current. Metropolitan Life, which assumed control of the 22-story skyscraper at the auction with a bid of $11.5 million, sold it to attorney Peter G. Angelos for $6 million.

"The Crestar building is a Class A, modern building with good floor plates, on-site parking, a Metro stop right next door, and it has a big block of contiguous space available," said Robert W. Kline, an auctioneer with Atlantic Auctions Inc., which will conduct the sale.

Calvert-Baltimore Associates -- made up of Bethesda construction magnate A. James Clark, BT Alex. Brown Inc. and Manekin Corp. principals -- fell behind on the mortgage in February, according to documents filed in Baltimore Circuit Court.

As of June 1, more than $51.44 million in principal, interest, late charges and other penalties were due on the loan, which dates to 1988. Interest on the TIAA mortgage is accruing at a rate of $15,552 per day, the court records stated.

The developers' troubles with the 327,000-square-foot skyscraper began in March 1997, when BT Alex. Brown vacated the building at the end of a lease to consolidate its headquarters in a 30-story high-rise at 1 South St.

The investment firm's departure left the Crestar Bank Building nearly one-third vacant, a high vacancy rate at a time when rates for newer, Class A properties are lower -- at roughly 14 percent -- than at any point in a decade, and when some office buildings are selling for record amounts.

"We unfortunately lost Alex. Brown as a tenant. The property now is not self-sustaining, and there's a large vacancy next door at the First Union Building," said Richard M. Alter, Manekin's chief executive officer. "But conversations continue with our lender. We're cautiously optimistic."

Local commercial real estate analysts said the Crestar Bank Building's mortgage delinquency is the latest symptom of a larger shift of the city's central business district toward the Inner Harbor, where vacancy rates are less than 10 percent. "There's no question that the bulk of downtown office activity is a reflection of where tenants want to be, which is on Pratt Street near the Inner Harbor," said Dennis P. Malone, a principal with Colliers Pinkard, a commercial real estate firm.

Pub Date: 7/17/98

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