A slice of downtown's hopes, fears

THE BALTIMORE SUN

On the first block of E. Fayette St., H. L. Mencken would put the Herald to bed and then scurry a few doors down for another night of raucous drinking. On the same block, real estate broker Ephraim Macht placed a couple of marble bare-breasted women on the front of his new building. And the Blausteins, oil patriarchs, scorned the city's plans for downtown by erecting their own office tower.

On that block, developer Marty Azola met financial ruin and Cathy Hughes extended her broadcast domain. Jeweler Gary Prince took a gamble, and Betsy Layne, deli owner, tried to make a go of it.

Like anywhere else, the first block of E. Fayette, a mix of offices and retailers, has its stories to tell, its tales of prosperity and calamity, desires realized and dreams abandoned.

Just west of the Clarence M. Mitchell Jr. Courthouse, between Charles and St. Paul streets, the block is removed from the Inner Harbor and contains no sleek new office towers. Still, the homely little street does not stand apart from downtown. It typifies downtown, revealing its ailments and perhaps something of its possibilities, too.

Although the block is not in imminent peril, it is suffering the same decline as much of downtown, where empty office buildings and storefronts convey a dwindling vitality at the heart of Baltimore.

January's announcement that corporate giant USF&G; was leaving its 35-story tower on Light Street was only the most dramatic example of an exodus that has been under way for a decade. Within a three-minute walk of the harbor are blocks of office buildings that are almost empty. And Charles Street, once one of the East Coast's more fashionable shopping strips, is dotted with vacant storefronts.

Empty buildings create their own dynamic. A bank downsizes and the bookstore down the street has to close because it can't meet its payroll. The bookstore's disappearance reduces foot traffic and a restaurant is in trouble.

"Vacant buildings are just as demoralizing in a commercial area as they are in a residential neighborhood," said David W. Kornblatt, chairman of a development company.

Between 1988 and 1993, Baltimore lost 55,180 jobs, more than 7,300 of them in finance, insurance and real estate, industries that were once based in downtown Baltimore. Downtown still has plenty of strengths, but they are concentrated near the harbor. Even with development around the harbor, the tax base of downtown is steadily eroding. That means less tax revenue -- about $25 million from 1992 through this fiscal year -- for an already poor city.

The first block of E. Fayette suffers from many of the ills afflicting downtown. The assessed values of its buildings have plummeted by millions of dollars over the past eight years while its offices have emptied of tenants bound for newer buildings or the suburbs. A succession of retailers -- restaurants, shoe stores, computer stores -- has come and gone.

The block has been victimized by the excesses of the 1980s -- overbuilding, real estate speculation and the savings and loan crisis. It is hurt by telecommunications, which makes central cities less critical. And it continues to suffer from fear of crime and a shortage of inexpensive parking.

While some buildings are nearly full, others have floor after floor of empty offices. Their owners aren't optimistic. "We're hurting," said William Siskind, a Baltimore lawyer who has owned the 12-story Jefferson Building since 1972.

His property, once home to Union Trust Bank, is less than half full. "I have not rented to a meaningful tenant -- meaning a whole floor -- for over 2 1/2 years," he said.

Next door to the east, at 8-12 E. Fayette, is a dingy six-story building owned by A. J. Billig, the venerable auction house. A shoe repair shop and a small convenience store occupy the ground floor of 8-12 -- the Eureka Life Building -- but Jack Billig, owner of the company founded in 1918 by his father, Abraham, said the floors above are a lost cause.

Two doors down from Billig is Ms. Layne, who seven years ago opened her own deli, Fresco. Back then, Ms. Layne, 52, had five or six employees. Now she's down to two.

"In the beginning," she recalled, "there were half as many restaurants and 30 percent more people, and every place there were lines from 11:30 to 2:30." The lines are mostly gone now.

A construction race

Like much of downtown Baltimore, it requires effort to find what is remarkable in the first block of E. Fayette Street.

It cannot be accomplished, for example, from a car or bus. From that vantage point, the buildings speed by in a gray blur, a stream of weary structures. Only by walking the block, by gazing up and down its buildings -- all but two of them nearly a century old -- does the street's verve reveal itself: the grand Ionic columns of the Junker Hotel, for example, or the elaborate Macht Building, a landmark, or the clock steeple on the old Baltimore Federal Savings and Loan Building, whose chimes once kept time for all of downtown.

The block even has its own love story of a sort. The fetching twins that Ephraim Macht erected on the face of his building gaze down on similarly unclad male busts on the Junker. "We've been trying to get them together for 90 years," said Amy Macht, Ephraim's great-grand-niece and a vice president in the real estate business he founded.

The street is one of Baltimore's oldest, dating to the 18th century. It wasn't until the mid-19th century that the name Fayette, a truncated version of LaFayette, stuck.

The block has long been primarily a business district, although it was once home to an imposing Methodist church and a cigar factory. Rebuilt after the Great Fire of 1904, the block consisted mainly of office buildings occupied by lawyers and title companies that valued proximity to the courthouse.

The block also had its odder tenants. The Baltimore Golf School was once there, as were the Marinello School of Beauty Culture, the Raymon Studio of Ballroom Dancing and the British Consulate.

For all of this century, the block has been overshadowed by a giant on its western end. Until about 1959, it was The Hub, a department store owned by Hecht's. After The Hub closed -- one of the first in a trend that would see every department store vanish from downtown -- Jacob Blaustein, head of Crown Central Petroleum, bought the site.

Mr. Blaustein had hoped to build the first office tower in Charles Center, the huge downtown urban renewal project that began about 1960.

When his bid for One Charles Center was rejected, a furious Mr. Blaustein bought The Hub plot directly across the street and vowed to put up his own building first, thereby depriving One Charles Center of potential tenants. (He didn't win the construction race, but he kept his promise of filling his building first, greatly distressing the mayor and city's business establishment.)

The block's greatest assets today are the long-term businesses occupying its center. A. J. Billig has been there since the 1930s. Kavanaugh's, a men's store, has been on the block since 1964, passing from father Kermit Goldbergh to son Tom. And the Machts, who lease hundreds of apartments in the metropolitan area, have been there since Ephraim Macht, a German immigrant who founded the Welsh Construction Co., put up his building in 1908.

The family theme has been furthered by the arrival in 1991 of Gary and Tom Prince, who relocated the jewelry store founded by their father in 1947.

The block has other strengths. In the spring, Chicago Title Insurance Co. moved half a block down St. Paul Street -- leaving empty space behind -- to become the main tenant in the old Baltimore Federal Building. But for every step forward, there is a step back. Household Bank, the building's first-floor occupant, is moving out after being taken over by First Fidelity.

Better space, good price

All of downtown's various afflictions resolve themselves into one ugly fact: too much empty office space downtown.

High vacancy rates have a negative trickle-down effect, and those hurt the most are older blocks such as the one on East Fayette. As tenants leave newer buildings, those from older properties move in to replace them. They can afford to make that move because landlords react to high vacancy rates by lowering rents. In downtown Baltimore today, the gap between the cost of renting in a newer building and an older building is negligible.

That's why Robert C. Prem moved his law firm, Prem & Dumler, out of Mr. Siskind's Jefferson Building in 1992, after seven years. He found he could move into a swanker building a couple of blocks away at only a minimally higher rent -- $12.50 a square foot rather than the $12 he was paying at the Jefferson. The building was newer, cleaner and classier, and it had parking underneath.

Something else happened when Mr. Prem moved. He split his firm and sent more than half of his people -- 10, to be precise -- to Perry Hall. He kept his real estate and trust departments downtown. But there wasn't any reason to maintain the rest of the practice there, especially because clients hated coming downtown. "It's the crime and the panhandlers," said Mr. Prem.

James Reed, another lawyer, also realized that he could move out of the Junker Hotel and into newer space downtown for about the same rent. Then, he decided he didn't have to be downtown at all. In 1993 he moved his business to Towson.

"My firm does mostly insurance defense work, and most of the insurance companies are out here anyway," said Mr. Reed.

Next door at Fresco, Betsy Layne was sorry to see him go. Mr. Reed was a regular customer, so much so that she named a sandwich for him. (Chicken salad with bacon, lettuce, Swiss cheese and tomato.)

By now, she's used to seeing her regulars disappear. "I had a customer who came in for lunch every single day," Ms. Layne said on a recent afternoon between sips of a soft drink. "He lost his job when a bank downsized. That was $5 a day, 21 days a month, 12 months a year" -- $1,260. Ms. Layne used to stay open until 5:30, but there just wasn't enough business, and she was worried that because downtown all but emptied in the late afternoon, she would be more vulnerable to robberies. She was held up at gunpoint once; that seemed enough.

Just then, a woman came through Fresco's front door. Surveying the empty tables, she asked, "Are you closed?"

"Not closed," replied Ms. Layne. "Just quiet."

Risky investment

Marty Azola arrived on East Fayette in 1987 with a reputation for restorations of historic but rundown buildings. When he left three years later, it was his career that was in shambles.

His downfall was the Junker, once a men-only hotel that was built nearly 100 years ago by Frank Junker, "a stout, short, silent, suspicious German," in the words of Mencken, who frequented the Junker's bar as a young newspaperman next door at the Herald.

Through the years, the Junker, a modestly priced favorite among traveling salesmen, passed through many hands and many names. It was known variously as the Maryland House, the Marlin House and the Regency. Its first floor went through even more transformations as one diner or bar after another opened and closed, most notoriously in 1960, when 12 civil rights demonstrators staged a sit-in against Hooper's, the restaurant du jour.

By the time Mr. Azola came along, the hotel was no longer the least bit attractive. He raised about $4 million to sink into the place, believing he could turn it into an elegant office building.

It became elegant -- and briefly successful, too. But in 1990, just as the rental market was collapsing, Mr. Azola lost his biggest tenant, Vermont Federal, to the savings and loan crisis.

"Just like that, I couldn't pay the mortgage," said Mr. Azola, 48. He was forced to declare bankruptcy and lost everything -- his home, his cars, his business, his career. He struggles to make a living now, doing engineering and consulting work.

Mr. Azola's experience serves as a cautionary tale. Other old structures, such as the Jefferson Building -- which has one of the city's last elevators requiring operators -- and the buildings owned by the Billigs need updating. But with so much empty space and rents so low, renovations don't pay for themselves. Year by year, the buildings become more dreary and less attractive to tenants.

The Junker is one of the few old buildings that sparkles. But Marty Azola isn't the beneficiary of those improvements. In 1991, the Prince brothers, owners of a jewelry store on Liberty Street, bought the Junker for $1.08 million -- about a quarter of what Mr. Azola put into it.

'Just gambling'

Even at that bargain price, Gary Prince is not sure he made a wise investment. "We bought in a down cycle, and I'm just gambling that it'll go up," he said.

In 1988, when Mr. Azola arrived on the scene, the state valued the Junker at $1.6 million. Today, the building is assessed at $638,000, and it is that high only because of Mr. Azola's improvements.

The next two buildings were valued at nearly $1.6 million in 1989. Two years ago, Cathy Hughes, a popular radio talk show host and owner of stations in Washington, bought them for about $600,000. Since then, their value has dropped an additional $100,000.

Ms. Hughes may represent the kind of building owner who is the best hope for a block like the one on East Fayette. She did not buy the buildings as an investment but as a headquarters for her four Baltimore radio stations (WERQ, WOLB and WWIN-AM and FM) and more than 100 employees. "One of my people said, 'You won't get your money out of it,' " said Ms. Hughes. "I said I don't plan on going anywhere. I wanted a home."

Still, she does lease some space. Ms. Layne's Fresco is one of her tenants, as is a law firm. Ms. Hughes wanted to find a retailer for the first floor of the corner building, where the Herald stood, but gave up. "We had hoped to get a Wawa [food market] but we were rejected because they thought the crime rate was too high."

Ms. Hughes said she, too, worries about crime. A couple of her employees have been in downtown banks during robberies. "I'm 24 hours a day, seven days a week. That means at midnight, I have employees coming in and out." There aren't enough police patrols, she said.

'Paying a penalty'

Dan Billig, Jack's 39-year-old son, agreed. "I like being downtown from 8 to 5 Monday to Friday. But it's very uncomfortable for me downtown after business hours. There's no police protection," he said.

There is, however, the Downtown Partnership, an agency formed two years ago to provide better security and sanitation. Uniformed but unarmed, its "guides" patrol downtown (until 11 p.m. in the summer). Laurie Schwartz, president of the partnership, said crime in downtown is down 10 percent the last two years.

Dan Billig appreciates the partnership, but his sense of safety hasn't dramatically increased. When he and his brother inherit the business, they might leave the city. "For our business, I don't have to be downtown, but I feel like I'm paying a penalty for being here," Dan Billig said.

The other longtime owners on the block do not have similar reservations. Amy Macht says the company is firmly entrenched in its historic building.

Next door to her at Kavanaugh's, Tom Goldbergh also has no intention of leaving. True, downtown is changing, and so is his business. Changing, he says, not getting worse, thanks in part to the state of Maryland, which has occupied several downtown office buildings.

"Instead of executives of USF&G; coming in to buy a $500 suit, we get 10 men who work for the state, each buying a blazer," he said.

The future of the other family-owned building -- the Blaustein Building -- is less certain. The high-rise is owned by American Trading Real Estate Co., the closely held corporation controlled by heirs of Jacob Blaustein. (The owners refused to be interviewed for this article.)

The building, now for sale, was erected at a cost of $12 million in the early 1960s. In 1986, the state assessed its worth at more than $25 million. Today, the assessment is $10.5 million (a loss of nearly $340,000 for the city in yearly tax revenue), but the agent marketing the building apparently believes he'll be lucky to get $9.5 million.

"This building in particular is difficult to market," Dennis P. Malone of the Colliers Pinkard real estate firm said in a letter to the state assessor. He blamed downtown's falling rents and "the presence of asbestos and the absence of sprinklers."

'Not major league'

Eddie Dopkin, president of Classic-to-Go, a catering business and restaurant in the Chicago Title Building, recently conducted an experiment. He stood outside the Signet Bank building, on St. Paul between Fayette and Baltimore, and watched where people went after leaving the building.

"What we found was that all the foot traffic headed up Baltimore Street, not this one," Mr. Dopkin said.

The first block of E. Fayette is not a destination. It doesn't attract lunchtime shoppers or suburban visitors, conventioneers or tourists.

"The draw is to Harborplace or the Gallery, where you can see 20 or 30 shops," said Tim Jackson, a downtown real estate broker. "That block [East Fayette] is just not major league.

It is not major league, but, because of its age, it is far more representative of downtown than the harbor. Its future, therefore, is significant, and not just to those who own businesses or work there.

"That block matters quite a bit," said David Gillece, a vice president with the Colliers group.

"You've got the Blaustein Building on the block, One Charles Center across the street, the Grace Building, 201 N. Charles. Signet is catty-corner to it. There are hundreds of millions of dollars of real estate investment within a stone's throw of that block. If that block were in peril, it would have a material effect on major investments that surround it."

But no one seems to know how to bolster an old block like the one on East Fayette. As Marty Azola's catastrophe demonstrated, old buildings are a bad investment now, which means that empty space is unlikely to be improved or filled.

Some, such as Bernard Manekin, a veteran developer, believe it will take a really big idea, like the development of the Inner Harbor or the Charles Center renewal, to help restore the area. Some planners and foundation executives are examining such notions as leveling whole blocks to make way for big, attractive downtown parks. The problem, Mr. Manekin said, is that there is no overall vision or direction of the kind that preceded progress in the past.

"One of my real frustrations is we've lost along the way the commitment to the center city and a vision of what it could be," said Mr. Manekin.

'Come on down'

Oddly enough, the very collapse of the real estate market downtown may hold the key to its eventual rejuvenation. Anirban Basu, a University of Baltimore economist, noted that for the first time, building and rental prices in some suburban locations such as Towson and Columbia exceed those in downtown.

"The thing that pulled people out of downtown -- the falling prices -- may now become the very thing that pulls them back in," he said.

Which is exactly why Ms. Hughes now owns a building in the first block of E. Fayette. "You always hear about the drawbacks of being downtown," she said, "but right now, I don't think you can beat the prices down here because there is so much available.

"That's why I'm here to say, 'Everyone, come on down to downtown.' "

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