Rouse sites bring $181 million

General Growth sells properties in Hunt Valley and Woodlawn

December 24, 2005|By LORRAINE MIRABELLA | LORRAINE MIRABELLA,SUN REPORTER

More than a year after General Growth Properties Inc. bought Columbia-founder and developer The Rouse Co., the Chicago-based mall owner has sold the bulk of former Rouse commercial and industrial properties in Baltimore County to two buyers for $181.5 million to better focus on its regional mall business.

Columbia-based Corporate Office Properties Trust said yesterday that it paid $124.5 million for 21 office buildings in Hunt Valley Business Community and in the Rutherford Business Center in Woodlawn.

A second buyer, Chicago-based First Industrial Realty Trust Inc., said it bought 16 light industrial and flex office buildings, in the same business parks, from General Growth for $57 million.

Both deals closed late Thurs- day.

General Growth, which acquired Rouse in November 2004 for $12.6 billion, has suggested from the start that it eventually would sell Rouse's office properties.

The mall operator inherited more than 7.9 million square feet of office space, much of it in the Baltimore area. It still owns former Rouse buildings in Columbia and Owings Mills.

David Keating, a spokesman for General Growth , said yesterday that the company had no comment on the two transactions.

Corporate Office Properties Trust, one of the largest owners of suburban office properties in the Baltimore-Washington region, said it bought seven buildings totaling about 705,000 square feet in the Hunt Valley Business Community, which is between Interstate 83 and York Road in northern Baltimore County.

The company also acquired 14 office buildings totaling about 402,000 square feet in the Rutherford Business Center, directly off Interstate 695 and close to the Social Security Administration headquarters.

"They're in our backyard. We've got the [management] teams there. We got a great price, and we can add to the value for the company," Randall M. Griffin, president and chief executive officer of COPT, said of the properties.

He said the price - $112 per square foot, funded with a revolving line of credit and a $43 million bridge loan - represented 75 percent of the cost of constructing the same buildings now.

The office portfolio is 84 percent leased to prominent corporate tenants such as McCormick & Co., AT&T and MCI in Hunt Valley and First Data Merchant Services, Provident Bank and Lockheed Martin in Woodlawn.

Griffin said he believes the properties have been somewhat neglected by General Growth and before that Rouse, which did not consider owning and operating office buildings part of its core business.

"With our attention to detail and customer service, we'll be able to enhance the leasing," said Griffin, who noted that COPT's overall office portfolio is 94 percent occupied.

"We have an opportunity to increase the income stream, but going in we've got a very good income that will be accretive to earnings," Griffin said.

The second buyer of the former Rouse properties, First Industrial, an owner, operator and developer of industrial buildings and warehouses, has been trying to increase its presence in the Baltimore-Washington region.

The real estate investment trust acquired 10 buildings totaling 582,000 square feet in Hunt Valley and six buildings totaling 370,000 square feet in the Rutherford center.

The Hunt Valley properties are 86 percent occupied, said Mark McConnell, First Industrial's regional director for the Baltimore/Washington region.

Tenants include Teledyne Technologies Inc., Mitsubishi, AAI Corp., System Source in Hunt Valley and The Roof Center, Chesapeake Rehab Equipment and Sears in Woodlawn, he said.

First Industrial also bought three parcels totaling more than 18 acres. "They're solid assets in established business parks that really represent the future growth for First Industrial," McConnell said. He said the REIT plans some cosmetic improvements to the buildings.

First Industrial also plans to redevelop a vacant warehouse in Hunt Valley and market it to a tenant who needs half-office and half-warehouse space. "We believe there's strong demand from quality companies," McConnell said.

Including the acquired properties, First Industrial owns about 3.3 million square feet of industrial space from Northern Virginia through Harford County. The company is developing another 400,000 square feet of warehouse space in the Baltimore Crossroads at 95 mixed-use park under development in Baltimore County.

lorraine.mirabella@baltsun.com

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