Three dollars and twenty-five cents a foot.
That's the value Orion Construction Corp. placed on the American Building yesterday, when it bought the 14-story office building at auction for $260,000.
And while the price for the 80,000-square-foot, nearly vacant building at 231 E. Baltimore St. is measurably less than the price of many single-family homes, it is indicative of the precipitous decline in values of Class B office space downtown.
"We've been following city properties for some time, and we feel they're going for very low prices," said Paul F. Black Jr., a business development representative of the Laurel contracting firm who attended the auction. "We thought this would be a good time to enter the market."
The Orion price fell far short of the $1.2 million appraisal conducted before the auction and the state's $3 million assessment for the 1994-95 tax period.
Orion intends to renovate the 114-year-old building and lease it, Mr. Black said. The building, Orion's first purchase in Baltimore, is expected to require $5 million in improvements.
More than any other type of commercial real estate in the Baltimore area, city Class B space -- commonly defined as properties older than 25 years, with small floor plates, little or no parking and a lack of other amenities -- has been slammed by the collapse of the industry four years ago.
Since then, an abundance of newer space and landlords' willingness to fill buildings for rental rates well below expected averages have decimated the older market downtown. The city's Class B market, comprising 110 buildings and 8.2 million square feet, suffers under a 25 percent vacancy rate, according to statistics compiled by commercial real estate brokerage firm Casey & Associates Inc.
That vacancy rate represents the highest of any submarket in the metropolitan area, and it is significantly higher than 15.6 percent rate recorded for the region as a whole. Furthermore, with a lack of white-collar job creation and technological improvements, most analysts believe much of the Class B space will never be reoccupied.
Despite the trend, Orion joins a small but growing breed of real estate speculators who are betting that Class B space will rebound. Earlier this year, H&S; Bakery Inc. President John Paterakis acquired the 18-story Munsey Building at 7 N. Calvert St. for $450,000, or $2.50 a square foot.
During renovation, Orion will have to contend with annual operating costs of roughly $480,000, including taxes, insurance and utilities. The building's most recent city tax bill totaled $72,720, according to state records.
Former American Building owner Henry J. Knott Sr., who bought the building in June 1977, contracted with Boston's Auction Co. last month to sell the property. The state's Office of People's Counsel and the Public Service Commission had occupied roughly half of the building until July 1993, paying an annual rent of $615,000 before relocating to the state-owned William Donald Schaefer Tower, said Dave Humphrey, a state spokesman.