First Mariner to buy headquarters from CEO Hale

Bank company will pay $20 million for building on 2 acres in Canton

October 20, 2004|By Bill Atkinson | Bill Atkinson,SUN STAFF

First Mariner Bancorp said yesterday that it has agreed to buy its headquarters building in Canton for $20 million from Edwin F. Hale Sr., the banking company's chairman, chief executive and largest stockholder.

The sale of the building, which is expected to be completed in the first quarter, was approved unanimously by First Mariner's group of 14 independent directors, said Joseph A. Cicero, president of First Mariner.

"It is a good transaction. I can't say that strong enough," Cicero said. "If we had the opportunity to buy the building and Ed was not the owner, we still would have bought the building."

Hale, who started the company and owns 20 percent of First Mariner, was not available for comment.

The move comes as Hale, who also owns the Baltimore Blast indoor soccer franchise, has been expanding his real estate holdings in the booming Canton area.

Cicero said the bank took a number of steps to make sure the transaction was properly handled given Hale's relationship to the bank as its top executive.

He said two independent appraisals were conducted to value the building and land. The property, at 3301 Boston St., has 79,000 square feet of space on about 2 acres. In addition, three members of the company's board of directors who work directly for the bank did not vote on the deal. And the bank's audit committee spent "considerable time looking at the transaction," Cicero said.

"We wanted to be careful that it was a good transaction for the company, that it was not viewed as an insider transaction solely for the benefit of Ed," Cicero said.

Benjamin E. Hermalin, professor of banking and finance at the University of California at Berkeley, said company transactions among insiders often can raise questions. Shareholders, for example, may raise concerns about whether a company secured the best price for a property.

"Any kind of thing like this is going to cause people to be concerned about self-dealing," Hermalin said.

Hermalin said that since independent directors voted on the transaction and proper appraisals were performed, the Mariner land deal likely was handled in the "appropriate and proper way."

As part of the sale, Cicero said, the bank will assume a $10 million loan made to Hale by another institution and will pay Hale another $10 million.

Cicero said that the bank will benefit because it will no longer have to pay $1.2 million in rent a year, which would likely have risen as the Canton area continues to develop.

"Our assumption is [the leases] would be renegotiated at substantially higher rates," Cicero said.

"The Canton market is booming so we get any appreciation in that. I think it will have a positive impact on our financial statement in the future. The appreciation is certainly a factor."

There also are several tenants in the building, Cicero said, including a law firm, a marketing agency, a construction company and a restaurant. Those tenants will have to pay the bank about $500,000 a year, Cicero said.

Cicero said Hale was approached by several people who wanted to buy the building. He asked Hale to sell the building to the bank.

First Mariner also said yesterday that third-quarter profit rose 12 percent to $1.6 million, or 25 cents per diluted share, compared with $1.4 million, or 23 cents per diluted share, from the corresponding period a year earlier.

Shares of First Mariner closed at $17.05, down 16 cents.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.