Pratt site for sale

Interest in 12-story office tower called `very, very good'

October 26, 2006|By Lorraine Mirabella | Lorraine Mirabella,sun reporter

One of downtown Baltimore's trophy office buildings, 500 E. Pratt St., is on the market and generating strong interest from potential buyers, an owner's representative said yesterday.

The owner of the 12-story tower, one of the newest at the Inner Harbor, will be considering offers over the next couple of weeks and expects to select a buyer before Thanksgiving, said Bruce Strasburg, a principal and senior vice president with Trammell Crow Co.'s Washington office. Trammell Crow is representing the building's owner, Multi-Employer Property Trust, a pool of public and private pension funds.

With a prime Pratt Street location across from the harbor, "this is a great property to own and we've seen very, very good interest," Strasburg said.

Strasburg said he could not discuss the owner's reason for selling the building.

Area brokers said Baltimore's investment sales market for Class A office buildings, which are newer and include more amenities, has been strong, attracting the interest of national and international investors.

The 279,000-square-foot tower at Pratt and Gay streets was developed by Trammell Crow in 2004 and completed last year, with an attached 900-car garage and a first-floor restaurant, The Capital Grille steakhouse.

The land is owned by Baltimore City Community College, which offered it for development in 1998. The owner pays the college ground rent, said Herbert C. Sledge, interim vice president for institutional advancement.

The tower is nearly 93 percent leased, with accounting firm Reznick Group, insurance company Aon Corp. and law firm Saul Ewing LLP among its larger tenants, according to CoStar Group Inc., which tracks commercial real estate information.

Rents asked are among the highest downtown, ranging from $34 to $36 a square foot, according to CoStar.

"We continue to see a lot of interest on the part of national investors attracted to Baltimore, based on the underlying office market and on more and more residents moving into downtown Baltimore," said Bo Cashman, a senior vice president at CB Richard Ellis specializing in investment properties.

Highest price

Baltimore, though considered a second-tier city among office investors, is viewed as affordable on a price-per-square-foot basis when compared with cities such as Washington, Philadelphia and New York, Cashman said. Class A office buyers are typically institutional investors who are snapping up properties around the country and worldwide.

In Baltimore, Class A office buildings downtown have sold for $200 to $300 a square foot, he said. This year, 100 E. Pratt St. sold for $207.5 million, or $312 a square foot, the highest price ever paid for a Baltimore office property.

The 500 E. Pratt building could fetch a similarly high price because of its premier address, brokers said.

"What's most attractive is the location, the unobstructed harbor views, the Pratt Street address, the amenities in the building and in the immediate vicinity," Cashman said. "When the market is going in a favorable direction, it can push rental rates higher and yield higher returns."

Several sales of office properties are pending, including the state Department of Transportation's 30-story World Trade Center, the slim, pentagonal office tower that has helped define the harbor's skyline for three decades. State officials have narrowed a field of potential buyers but have not announced a buyer.

Vacancies in the Class A office properties in the city's central business district have dropped slightly, on average.

The vacancy rate fell to 12.08 percent in the third quarter, compared with a little more than 14 percent in the third quarter of 2005, said Kevin Wille, a first vice president with CB Richard Ellis in Baltimore.

Rents are steady

"It's a function of the strength of the overall economy, and you're continuing to see business growth in the city," Wille said.

Rents, meanwhile, have remained steady, averaging $25.51 per square foot in the central business district in the third quarter, Wille said. Some high-profile buildings have increased rents, but others continue to have blocks of vacant space, such as the 750 E. Pratt St. building.

lorraine.mirabella@baltsun.com

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