Rockville condominium conversion to resume

Lender struggles with market collapse

CBRE’s struggles with the Monterey and a second conversion project in Towson are a sign of how the condo collapse locally and nationally has begun to hurt lenders. CBRE’s stock has been rocked by investors after the company reported a second-quarter net loss of $4.6 million stemming from a $7.8 million non-cash impairment charge on the two foreclosed properties.

The company announced plans to resume sales of Monterey condo units immediately and to pump $17 million into the conversion project when it filed its quarterly earnings report with the U.S. Securities and Exchange Commission on Tuesday.

CBRE said it has resolved issues raised by Montgomery County housing agencies, which had claimed a right of first refusal to purchase the Monterey and had proposed that a proportion of the completed condominium units be sold below market.

‘‘The county had claimed a right of first refusal ... but because this was a foreclosure sale and not a voluntary arrangement between two parties, we argued that this would not apply,” said Susan Orr, CBRE’s legal counsel.

She said the firm expects a certificate of compliance from the county next week, once the deadline passes for any tenant’s organization to stake a first-refusal claim.

The county’s Housing Opportunities Commission and Department of Housing and Community Affairs maintain that they have a right of first refusal, but neither plans to act on it, said Tedi Osias, director of legislative and public affairs for the commission. The two agencies had been exploring the option and had discussed the possibility of a set-aside of a number of below-market units for sale at the project, which over the years had developed into a naturally occurring housing complex for seniors.

‘‘In the final analysis, we decided not to go ahead to exercise our right of first refusal,” Osias said.

Although the county claim has been resolved, it has delayed CBRE from resuming development and sales efforts and implementing its intended business plan for the project. In May, the company foreclosed on the Monterey, a 434-unit condominium conversion project, and Rodgers Forge, a 508-unit condominium conversion project in Towson, after Triton Real Estate Partners, the Annapolis developer, defaulted on its debt payments.

Triton’s collapse was part of the popping of the region’s condo development bubble, which has seen almost 20,000 condominium units removed from the pipeline during the past 12 months, either by canceled conversions or shifts in new construction to rental units, according to an analysis of area condo trends by Delta Associates, a real estate research and consulting firm, and the Mayhood Co., a condo marketing company, both in Alexandria, Va.

The foreclosures contributed to a collapse in CBRE shares, which fell as low as $3.52 on Aug. 7, when it announced its quarterly earnings and said it would suspend new investments because of the instability in the credit markets. The firm’s shares had reached a 52-week high of $18.39 on Dec. 18.

CBRE faces its own credit crunch because two creditors have requested additional equity or refinancing in connection with their lines of credit.

CBRE bought the Monterey in a foreclosure auction for $100, plus assumption of $150 million in debt, and has reported its net carrying value as $31.7 million. The company took control of Rodgers Forge with a winning bid of $1 million, plus assumption of $36.5 million in debt and reported its net carrying value as $22.9 million.

Lockheed leasesspace in Rockville

Lockheed Martin Corp. of Bethesda is leasing almost half of a three-story, 81,866-square-foot office building facing Interstate 270 in Rockville from Washington Property Co. of Bethesda.

Lockheed’s lease of 35,499 square feet means that the building at 4 Research Place is fully leased, according to Washington Property, which bought the property last year.

Commercial real estatenews items may be mailed to: Steve Monroe, The Business Gazette, 1200 Quince Orchard Blvd., Gaithersburg, MD 20878; e-mailed to smonroe@gazette.net; or faxed to301-670-7183.

Tenants sought forformer GM site

Duke Realty has completed demolition of the iconic General Motors factory in Baltimore and is looking for tenants for the first two of 16 buildings planned for the new 2.8 million-square-foot Chesapeake Commerce Center.

The Indianapolis company bought the 184-acre site in East Baltimore last year for $56.6 million, according to its annual report. Duke plans a 10-year, $160 million mixed-use project that will include warehouse, industrial and office space.

The company broke ground on its first building in June — a 117,600-square-foot warehouse shell with parking for 110 vehicles. That facility and a 342,000-square-foot building with parking for 206 vehicles should be completed this year, Duke said.

The company picked the Baltimore office of CB Richard Ellis to handle leasing for the two buildings.

‘‘This is perhaps the most formidable industrial project in the Mid-Atlantic today and positions Baltimore City as an excellent location for new businesses to come into the area, and for existing business that wish to expand to stay in the region,” said Bill Pellington, a senior vice president at CBRE who heads up the leasing team.

Tenants at the Chesapeake Commerce Center might qualify for state economic incentives, such as tax credits under the Maryland One Income Tax Program, because the site is a targeted area for economic revitalization. The property is part of the city’s Enterprise Zone and is under review by U.S. Customs and Border Protection to be listed as foreign trade zone.

For 68 years, the site was home to an auto assembly plant that produced everything from Pontiac GTOs in the 1960s to Chevrolet Eurovans during its last years before closing in 2005.

Baltimore landmarksold for $10.2 million

Bernstein Management Co. of Washington, D.C., has announced the purchase of the old Hutzler’s Palace department store site in Baltimore for $10.2 million, the company’s second acquisition in the city.

The 230,000-square-foot property at 300 W. Lexington St. has a mix of office, telecommunications and retail tenants. The building sits at a prime location next to the Lexington Market and a light rail stop. The seller was Castle & Cooke of Los Angeles.

In May, Bernstein bought 1100 Wicomico St., a 350,000-square-foot warehouse facility in Southwest Baltimore’s Carroll-Camden Industrial Park, for $8.8 million from GFI Partners of Baltimore and Rhodes Development of Boston, according to CBRE, which represented Bernstein.

Shopping center fetches$14.5M in Prince Frederick

Developer Edens & Avant of Columbia, S.C., bought the Calvert Village Marketplace in Prince Frederick for $14.5 million from Calvert Village LP, according to the Washington office of Cassidy & Pinkard Colliers, which represented the seller.

The 160,773-square-foot shopping center, built in 1971, is 98 percent occupied and is anchored by a Safeway and an Apex Movie Theatre.

Commerce Centerbreaks ground

Buckeye Development and Waynesboro Construction broke ground Aug. 7 on McKinney Commerce Center Condos on Metropolitan Court off Buckeystown Pike in Frederick.

The 32,500-square-foot center will house seven units and is expected to be completed by December. Harne Bowen Architects of Myersville designed the center; Tyler-Donegan Real Estate Services of Ijamsville will handle leasing.