Buyer of city landmark may wait years to profit

Skyscraper: A 78-year-old agreement with a tenant means it will take 18 years before a city landmark will make much money for its new owner.

September 18, 2002|By Meredith Cohn | Meredith Cohn,SUN STAFF

It was mid-July when the grand Bank of America building, downtown Baltimore's first skyscraper, was put up for sale, and real estate broker Mark Schall knew just who would want it - even though the buyer was not likely to make much money from the deal for another 18 years.

Schall called the Levitts, a Rockville family that runs Nellis Corp. Senior management, which includes two brothers and their father, were able to analyze the deal and respond almost immediately. They beat out more than a dozen other bidders. Nellis, a private company, confirmed last week that it had bought the building.

The complex transaction could result in big rewards down the road.

Nellis bought the property for $5.325 million, according to land records. That's substantially below its $19.65 million assessment. But a 78-year old agreement with its lead tenant, Bank of America, allows the bank to pay little in rent until 2020. Nellis won't make much or any money on the building until then, when it can raise the rent.

"We're long-term investors," said Randall J. Levitt, 48, who founded the company in 1982 with his brother, Mark A. Levitt, 46.

The strategy is typical for Nellis, said Schall, senior vice president of National Real Estate Brokerage Inc. and a professional acquaintance of the Levitts for 12 years.

"They're very patient and deliberate people," said Schall. "Eventually, there will be a windfall, so it's a very good long-term investment. The Levitts aren't in this for themselves. They're in it for their children and their children's children."

Nellis was formed by the Levitt brothers, former lawyers whom their business acquaintances call "down to earth," "smart" and "fair."

Both took a leave from their practices to start the company.

"We were fortunate enough that the law firms we were working for gave us one-year leaves of absence with the understanding that if we weren't successful in creating a business, we could come back and resume our legal careers," said Randall Levitt. "I'm not sure if the offers to return are outstanding anymore."

But the family members and four other senior managers - 20 employees total - don't seem to need other jobs.

They will not disclose financial information about the company. But Randall Levitt said most of the investment capital is family money. They have debt, "but much less than most real estate concerns," he said.

The company is smaller than most publicly traded real estate investment trusts, he said, and sometimes goes more than a year without buying a property.

The Levitt family once was a major shareholder of Dial Finance, a publicly traded consumer finance company. The brothers' father, Richard S. Levitt, 72, was vice chairman of Norwest Corp., a bank holding company that since has merged with Wells Fargo & Co., from 1983 to 1988.

Nellis owns 20 retail properties, five industrial properties and three office buildings around the country.

The company redevelops downtrodden properties. Company officials, who rely on brokers to bring them deals, look for buildings with below-market leases and significant vacancies. It improves them and, if all goes well, makes a profit when the rents go up and the vacancies are filled.

In Maryland, Nellis owns Jennifer Square Shopping Center in Annapolis, Odenton Shopping Center, Germantown Square Shopping Center, Festival at Muddy Branch Shopping Center in Gaithersburg and Capital Plaza Mall in Landover.

Karen Wilner, a principal and retail real estate specialist at NAI KLNB Inc., has helped find tenants for the Odenton center. She called company officials "savvy and professional" for their choice of properties.

"If real estate is all about location, location, location, then Jennifer Square, for example, is a fabulous acquisition," she said. "It was under-performing, and now it's not."

She and others said the family is not flashy or attention-seeking. Neither, for the most part, are its properties. The Bank of America Building, well known in Baltimore for its gold top and art deco design, is among its few trophy buildings.

Columbia-based Corporate Office Properties Trust has teamed with Nellis on two deals.

Roger A. Waesche Jr., chief financial officer at COPT, said Nellis officials are able to make decisions and close on projects much more quickly then most. They can also wait longer for returns on their investments.

That's partly because they are not public and beholden to shareholders, he said, and because they know their business.

"They have a good understanding of real estate and contracts, and the combination makes them easy to deal with," Waesche said.

Nellis has been the equity partner in two of COPT's office building developments.

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