First Maryland says it may move if rent downtown isn't cut

THE BALTIMORE SUN

First Maryland Bancorp is considering relocating its downtown headquarters of more than 20 years, the result of a battle with its landlord over what it considers to be excessive rent payments.

The bank holding company's lease in the 22-story First Maryland TC Building expires in 1997. It has not ruled out pulling its 700 employees from downtown, although a move from the city is considered a remote possibility, company officials said.

"The marching orders to my people are to look at all alternatives," said Jerome W. Evans, a First Maryland executive vice president.

"Our preference is for downtown," he said. "We feel a commitment to downtown and we'd like to stay, but that wouldn't preclude us from looking elsewhere. I'd say there's a bit of uncertainty at this point as to our destiny."

The dispute between the building's owner and the parent of First National Bank of Maryland centers around the bank's estimated $5.6 million annual rent payments, or $26 per square foot, for space in the 23-year-old building.

First Maryland occupies roughly 215,000 square feet, or more than 60 percent, of the 25 S. Charles St. building.

In the wake of USF&G; Corp.'s decision to leave its 35-story tower downtown and the continuing sluggish office market downtown, First Maryland believes its rental payments should be in line with the current market rate for older, so-called Class A office space at $17 to $18 per square foot.

At that rate, First Maryland would trim roughly $2 million a year from its overhead.

First Maryland's desire to cut its rent payments stems from increased competition from the likes of NationsBank Corp. and First Union Corp., two North Carolina-based banking conglomerates that since 1992 have forced First Maryland to cut costs. First Maryland is owned by Allied-Irish PLC.

Although Mr. Evans declined to discuss specific alternatives to the First Maryland Building, both the 26-story Signet Tower and the 25-story skyscraper at 120 E. Baltimore St. are likely to have enough space available for the $9.5 billion bank two years from now.

In the case of 120 E. Baltimore St., Alex. Brown Inc. is set to vacate several floors there when it consolidates its headquarters into at least 145,000 square feet in the 30-story Commerce Place office tower, in March 1997.

While First Maryland has been in discussions with the 25 S. Charles St. building's owner for some time, Mr. Evans characterized the negotiations as "stalled."

"We value them as a tenant, and they're an integral part of the building," said Richard D. Stilovich, a regional director for Hallwood Realty Partners Ltd. Partnership, the building's owner.

"We'll do anything within our power to keep them. If the bank's priority is economics, then I'm confident we can be as competitive or more competitive than their other options," Mr. Stilovich said.

But in order to cut the bank's lease rate, Hallwood Realty will have to reduce its debt payments on the building to lender Heller Financial Inc., of Chicago.

Hallwood assumed more than $54 million in debt on the building when it purchased the partnership interests of former owner Equitec Financial Group Inc. in late 1990, according to city records.

"Our lender has a vested interest in the building, and I feel confident with their real estate experience," Mr. Stilovich said.

Hallwood Realty, a Dallas-based firm that owns 11 properties nationwide and manages 6 million square feet of commercial space, assumed control of 42 properties in 1990 and 1991 after Equitec became a casualty of the real estate industry's collapse.

First Maryland has occupied its namesake building since 1972, when a team consisting of David W. Kornblatt and Whiting-Turner Contracting Co. President Willard Hackerman developed it at a cost of $13.5 million.

Equitec bought the building and 450-space parking garage for $42.5 million in July 1984, city records show.

"Simply put, we're looking to decrease our costs," Mr. Evans said. "But at the same time, we also want a headquarters-type of presence for what is the largest bank headquartered in Maryland."

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