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Constellation, KLNB weigh merging units Divisions managing property and assets would be affected; Trend is consolidation; Potential portfolio would contain 9 million square feet


Baltimore Gas and Electric Co.'s commercial real estate subsidiary is holding discussions with KLNB Inc. about merging their respective asset and property management divisions.

Although talks between Constellation Real Estate Inc. and KLNB, a prominent real estate brokerage and management firm, are preliminary, both sides acknowledged that a merger would enhance their businesses.

"Our goal is to aggressively expand our asset management operations," said Randall M. Griffin, Constellation's president. "So merging with KLNB certainly makes sense, but it has a long way to go."

A merger of the two companies would create one of the Baltimore area's largest property management entities, controlling a portfolio in excess of 9 million square feet of commercial space -- more than all the modern office space downtown.

"We've had discussions, and at this point all we've agreed to do is continue talking," said John P. Blumer, KLNB's executive vice president and chief operating officer.

Mr. Blumer declined to provide specifics concerning the talks with Constellation, but he did say that KLNB's successful brokerage operation -- which generated the bulk of the firm's $327 million in transaction volume in 1994 -- would remain independent and unaffected if a merger takes place.

As new commercial development has cooled in the wake of the industry's collapse five years ago, various real estate companies have looked at property management as a way to boost their bottom lines.

Earlier this year, development and brokerage firm Manekin Corp. considered merging with the Carey Winston Co., one of the Washington area's premier brokers and property managers, as part of a strategic growth plan. Thus far, the two sides have not reached any agreement.

Additionally, as the real estate industry consolidates in favor of large, institutional property owners, regional firms such as KLNB and Constellation are expanding their services in an effort to attract clients such as pension funds.

"There are competitive advantages achieved with critical mass," Griffin said. "Institutions want to know that companies they deal with have solid financial underpinings as well as market knowledge. And asset management creates investment opportunities where we can add value."

Constellation, which controls a $477 million portfolio of office buildings, shopping centers, industrial parks and a 2,500-acre planned community in Odenton, manages roughly 2.5 million square feet.

KLNB, by contrast, manages about 6.5 million square feet of retail and industrial projects for institutional clients such as Trust Co. of the West affiliate TCW Realty Advisors, MetLife Real Estate Inc. and TA Associates Realty.

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