Mercantile-Safe Deposit & Trust Co. yesterday sold the five-story Clark Building in Columbia for $6.5 million -- a sign that the Howard County office market has rebounded from its dour position of three years ago.
"The Columbia office market has witnessed significant improvement, even in the past few months," said Nicholas J. Kollman, president of Kollman Properties Corp., which purchased the 107,000-square-foot project in downtown Columbia. "We think rental rates are beginning to move upward, and the building, as well as the market in general, shows a lot of promise."
In addition to his real estate activities, Mr. Kollman is also president of the John D. Lucas Printing Co., one of the region's largest printing firms with more than $30 million in annual sales.
Mercantile's decision to sell the project also signals the extent of Columbia's recovery, because the lender had previously stated that it would not sell the Clark Building unless it realized a "fair value."
Mercantile had assumed control of the 5565 Sterrett Place building in 1991, as part of a debt workout with the building's former owner, the McCuan Development Group. The bank had lent McCuan more than $21 million in 1989 to purchase the Clark Building and a 12-story building adjacent to the Mall in Columbia, but the developer was unable to sustain its debt service.
At the time Mercantile took possession, Columbia's vacancy rate stood at 25 percent, causing a domino affect throughout the market. Lenders ultimately foreclosed on $150 million worth of property containing 1.8 million square feet, or 35 percent of all the office space in the planned community.
Since then, Columbia's vacancy rate has dropped to 14.1 percent, as large tenants such as Arbitron Ratings Corp. and Signet Mortgage Corp. have relocated to the area, according to recent statistics compiled by commercial real estate firm Colliers Pinkard.
The Clark Building has rebounded from its 20 percent occupancy level in 1992. Mercantile has invested roughly $2 million, and the 20-year-old building is 95 percent committed to tenants such as Greenspring Health Services and JSA Healthcare.
"Mercantile sensed that the building was hitting its full value in this real estate cycle," said Joseph A. Callanan, director of investment services of Manekin Corp., which managed the building on behalf of Mercantile and represented Kollman in the purchase negotiations. "And given that prices are still below replacement costs, Kollman saw a good opportunity in a turning market."
Mercantile officials could not be reached for comment.
Manekin had first attempted to sell the building for Mercantile in June, when it included the building in an auction. The bank would later reject the $5.3 million offered, claiming the price failed to meet its reserve price.
The Clark Building is expected to generate $1.23 million in rental income this year, and produce a $496,000 net operating income, according to documents presented at the auction.
The last major Columbia office building purchase occurred in August 1993, when Aetna Realty Investors Inc. sold the two-building, 126,000-square-foot Woodmere I and II complex to Universal Equities Group Inc., an investment firm, for $7 million.