Top-tier buildings now on the market Several landlords testing the waters in the suburbs


Buoyed by declining vacancies and increased interest from institutional investors, several landlords are testing the waters in an effort to sell top-tier suburban office buildings.

Most notably, Riparius Corp. is marketing five buildings in Owings Mills and Timonium for $48 million, according to an investment package obtained by The Sun.

"We think this is a good time to sell because suburban office projects seem to be the preferred asset class among institutional investors," said Michael McCarthy, president of Riparius. "In the supply and demand equation, the suburban market in most of Baltimore County is very tight at this point, and in favor of the developer."

Timonium-based Riparius plans to invest profits from the sales into its other businesses and projects, including a 180-acre planned office park in Owings Mills slated to contain 3.5 million square feet.

Riparius isn't alone in attempting to take advantage of improving market conditions, including rising rental rates and demand among institutional investors such as pension funds and real estate investment trusts.

Aetna Life & Casualty Inc. is offering a seven-story Towson office building for $13.65 million.

The decision to market Court Towers and its adjacent eight-level parking garage, a project completed in 1989 at a cost of $26.4 million, marks the second time the Hartford, Conn.-based insurer has worked to sell the building it acquired for $11.8 million in a February 1993 foreclosure auction.

Shortly after taking control of the building, Aetna aggressively began hawking Court Towers, but then abruptly pulled it off the market, a move that many analysts felt was spurred by the sluggish market conditions and a lack of institutional interest at the time. How times have changed.

"High cube distribution centers and suburban office projects are at the top of the list," David Rabin, executive vice president of pension advisory firm Koll Investment Management, whose parent is one of the nation's largest real estate managers, said earlier this week at a National Association of Office and Industrial Parks meeting.

Building owners also have been motivated by recent sales, such as the $30 million sale of the two-building Dulaney Center office complex in Towson to a San Francisco pension consultant and the roughly $10 million sale of the Farm Credit Bank of Baltimore building in Sparks to Fila USA.

The other factor driving the potential sales is location: Unlike downtown, office projects in Baltimore's suburbs have rebounded well from the local market's collapse six years ago.

The vacancy rate in Baltimore County stands at 11.1 percent, 4 percentage points less than the rate for the metropolitan area overall and roughly half that of the city, according to statistics compiled by real estate services firm Colliers Pinkard. "The suburban north market, as we call it, represents a compelling investment opportunity because rents are increasing modestly, there's no new construction and occupancy levels are ratcheting up," said Philip C. Iglehart, a Pinkard principal directing both the Riparius and Aetna sales efforts.

The last new Baltimore County office building completed was the 10-story Towson Commons in May 1992. As are the other buildings being offered, it is nearly fully occupied.

Additionally, all of the structures recently sold or currently being marketed are so-called Class A buildings, newer properties with modern amenities and on-site parking. They are expected to fetch better prices because they are on average better occupied than older buildings and command higher rents.

Those factors -- age, occupancy and location -- may prevent other developers from selling their assets, however, even if they are in the suburbs.

"It's a good time to sell if you own a building in Owings Mills, Timonium or Towson, but Hunt Valley is weak," said John C. Childs Jr., senior vice president of Casey & Associates Inc. and head of the commercial brokerage firm's Baltimore County office.

For Riparius, the combination of location and rental income in its five buildings is expected to garner great attention.

Its 9690 Deereco Road project, for instance, an eight-story Timonium building completed in 1989 and being offered for $20.1 million, is almost fully occupied. Its anticipated net operating income -- rents minus operating expenses -- will be $1.85 million in 1996, according to the offering package.

The Atrium Building, a two-story structure adjacent to 9690 Deereco Road that serves as the worldwide operations center for Alex. Brown Inc., will generate $1.14 million this year, the key factor behind its $12.7 million asking price.

In Owings Mills, Riparius hopes to sell three single-story buildings for $15.2 million. Completed in 1989, they are expected to generate $1.6 million in net operating income this year.

Aetna's Court Towers has a similar story. Nearly fully occupied by a host of tenants such as Alex. Brown and the law firm Whiteford, Taylor & Preston, the building will provide $1.8 million in income this year, after expenses.

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