CS First Boston and a Phoenix investment firm have teamed up to acquire the debt on the downtown NationsBank Center II, a move eventually expected to give the group control of the eight-story office building.
"We think there's a potential for upside with good management," said Gerald V. Blomquist, a managing partner of Biltmore Holdings Corp., the Arizona investment firm. "We think there's a sense of improvement in the Baltimore economy, and it makes sense to purchase assets based on that improvement."
Although neither Mr. Blomquist nor the sellers, the federal Resolution Trust Corp. and First Union Corp., would comment on the price of the mortgage, sources said the duo paid roughly $8.5 million in cash.
Since acquiring the building's $20.3 million mortgage earlier this month, the partnership between Biltmore and the $110 billion New York brokerage house has petitioned the U.S. Bankruptcy Court to allow a foreclosure auction.
Tower II Associates Ltd. Partnership, controlled by developer Ackerman & Co. Inc., filed for Chapter 11 protection in January after Provident Bank of Maryland filed a lawsuit over the failure to repay a $1.45 million loan dating to 1989.
Last month, the Ackerman group agreed to relinquish control of the 160,000-square-foot building at 100 S. Charles St. in exchange for debt forgiveness, bankruptcy court documents stated. Ackerman recently valued NationsBank Center II at $7 million.
If the court grants permission for a foreclosure auction, it is expected that the Biltmore/CS First Boston team will acquire the building since it has the most at stake.
Richard J. Oppitz Jr., a Provident managing partner, said the bank's claim would probably be wiped out in the event of a foreclosure auction.
First Union became involved with the debt after purchasing the assets of First American Bank, a participant in the RTC mortgage. The RTC's involvement dates to April 1990, when it seized lender Baltimore Federal Financial.
"Obviously I think both the RTC and First Union were satisfied with the transaction or else they wouldn't have completed it," said Richard M.Kremen, the head of Piper & Marbury's bankruptcy department who represented First Union.
The NationsBank Center II deal is the first Maryland purchase for Biltmore, formed three years ago to take advantage of depressed real estate markets nationwide.
Mr. Blomquist said Biltmore has purchased about $400 million in undervalued mortgages and real estate, and owns more than one million square feet of commercial space.
NationsBank Center II, a 7-year-old property, is 90 percent occupied by federal government agencies, CFS Health Group, Mead Data Central and others. The building generates roughly $1.75 million in rent annually, court records show.