Munsey Building going back to lender
One of downtown's most problem-plagued Class B office buildings is slated to be returned to its lender this week, but the local partner in the Munsey Building at 7 N. Calvert St. says those problems are endemic among older structures.
"[T]he market became so depressed it did not make sense to lease space," said David Bavar, a Timonium real estate investor who owns the building along with two Washington-area partners.
That's why Mr. Bavar and partners Ralph Dweck and the estate of Samuel Dweck allowed South Charles Realty Corp., the problem-asset arm of MNC Financial Inc., to take back the deed to the property this week. The exchange was designed as partial settlement of a loan balance of about $3 million.
Mr. Bavar said Monday that the deal will be completed as soon as lawyers finish drawing up the documents. The partners have controlled the 180,000-square-foot building since 1979.
The economics are grim: Mr. Bavar said fixing the space to be ready for leasing would cost $15 a square foot, including brokers' commissions. Paying the loan for that work would cost $3.75 a square foot per year, with taxes and operating costs eating up another $6.50 to $6.75.
"You're already up to $10 or $10.50 and you have yet to pay your [mortgage]," Mr. Bavar said. "That can be another $4 a square foot."
With annual Class B rents hovering around $12 a square foot, the problem is obvious.
"If you were successful in finding a tenant for 10,000 or 20,000 square feet in the building, you would lay out $150,000 to lose $40,000 to $50,000 every year you lease the space," he said.
Mr. Bavar said the only solution for other Class B landlords is to retain tenants. That will allow them to avoid costly improvements to lure new tenants in the Class B market, which has a 25 percent vacancy rate.
The Munsey Building's spiral began in 1989, when the state Attorney General's office vacated about 85,000 square feet of space to move to the new St. Paul Plaza complex at 200 St. Paul Place. The Munsey Building never came close to replacing its biggest tenant and was 88 percent vacant at midyear, according to a report by Spaulding & Slye, a commercial real estate brokerage firm.
The partners tried to salvage the property by targeting the state of Maryland as a potential buyer for the building. The state is in the process of buying up to 550,000 square feet of downtown office space, hoping to limit its office leasing.
That strategy included refusing to renew tenants as leases came due -- further boosting vacancies. "[The state] needed the building substantially vacant," Mr. Bavar said.
But the state chose to buy nearby 6 St. Paul Centre, a 305,000-square-foot tower, and the 108,000-square-foot Shillman Building at 500 N. Calvert St. The state wants to buy a third building, but Mr. Bavar noted that the Department of General Services won't have any money available to buy another building until July, barring emergency action by the General Assembly.
So Mr. Bavar and his partners decided to hand over the building to South Charles.
"We didn't want to sit any longer," Mr. Bavar said.
Shopping center is fully leased
Constellation Real Estate Inc. says it has leased the last space in its Valley Centre in Owings Mills, bringing the shopping center's occupancy to 100 percent nearly six years after it opened.
Standard Carpet will open its seventh Maryland store at the Reisterstown Road location, Constellation spokesman Larry Lichtenauer said. That will bring the total tenant count to 28 stores.
"We've got a waiting list for spaces that are filled now," Mr. Lichtenauer said.
The company, a unit of Baltimore Gas and Electric Co., said it also has reached a deal with Maryland Permanent Bank & Trust Co. to build a 5,000-square-foot branch office in the center's parking lot. The branch will open late next year or in early 1995.
Federal has bought Bala Cynwyd center
Federal Realty Investment Trust of Bethesda continued its push toward out-of-state expansion last week as it announced the purchase of the Bala Cynwyd Shopping Center in Bala Cynwyd, Pa. for $16.5 million in cash.
The 38-year-old center is 95 percent occupied, the company said. Its 242,000 square feet of space are anchored by a Lord & Taylor department store and an F.W. Woolworth variety store.
The center is Federal's 11th in metropolitan Philadelphia and 46th center overall. The company's strategy is to buy underused, usually older, centers and make them more profitable by changing the tenant mix and renovating the properties.
Venture to renovate BARC headquarters
A joint venture led by MacKenzie/O'Conor Piper & Flynn Commercial Real Estate Services and the KMJ Group of Baltimore has won a $2 million contract to renovate the new headquarters of the Baltimore Association for Retarded Citizens.
MacKenzie/O'Conor spokeswoman Patricia B. Farrell said the work will be done by next spring. The association bought the old Armco Building at 7215 York Road, in Baltimore County south of Towson, earlier this year.
MacKenzie Executive Vice President Robert Aumiller will oversee the project.