This story was corrected on Oct. 30, 2009. An explanation follows the story.
Corporate Office Properties Trust announced Thursday it bought the First Mariner Bank Tower and surrounding properties in Baltimore for $125 million in a deal that rescued the Columbia company's $30 million loan on the project from the impending foreclosure auction by a French bank.
The transaction, concluded just before Natixis Bank planned to sell the 17-story building in the Canton neighborhood Oct. 21, includes the acquisition of the 474,000-square-foot office tower for $105 million, plus a parking lot, a utility distribution center, four waterfront lots and water rights.
The properties are all part of the Canton Crossing planned unit development, where COPT intends to build an additional 500,000 square feet of office space. The company disclosed that it plans to sell off land or lease lots for other builders to develop 150,000 square feet of retail, a 450-room hotel and a marina, all of which also have been approved.
Company president and CEO Randall M. Griffin declined to provide details of the transaction during a conference call with stock analysts Thursday, saying only that it benefited not only COPT but Natixis and Canton Crossing developer Hale Properties, which defaulted on a $84 million loan it owed to a Paris bank in August. Hale also was not making payments on a $25 million mezzanine loan from COPT, which had run up to $30 million as a result.
"It was sort of a win-win for all parties involved, and should be very good for our stockholders," he said.
The office tower is 91 percent occupied, and COPT expects the remaining space will be filled easily as the economy recovers. The deal is expected to produce a 9 percent capitalization rate, which is determined by dividing the property's net operating income by its purchase price.
Although developer Edwin F. Hale Sr. so far is the only builder to erect an office tower in Canton — an otherwise low-slung neighborhood of industrial and residential properties — Griffin predicted that the building will benefit from the movement of tenants out of Baltimore's traffic-choked Inner Harbor central business district.
"These are excellent, high-quality assets that COPT has acquired at a fair price, with additional upside resulting from the potential for future development," Griffin said. "Canton Crossing, in the Canton area of Baltimore, is in close proximity to I-95 and is well positioned to capture future growth along the Baltimore waterfront."
Griffin stressed that the office tower has a solid tenant base, which is not expected to have much rollover before 2016. The building is anchored by Carefirst, which occupies 34 percent of the space.
Griffin expressed little concern that Edwin Hale's First Mariner Bank would soon depart its namesake headquarters, despite its financial troubles. The Federal Deposit Insurance Corp. last month issued a cease-and-desist order against the independent bank, which requires that First Mariner address its rising portfolio of problem loans with a plan to boost its capital, liquidity and earnings.
"I am confident that they can raise capital and stay in [the] building for the long term," Griffin said.
As for Hale himself, COPT's acquisition means that he will vacate his penthouse condominium atop the First Mariner Tower when the lease expires at the end of the year. COPT intends to take back the top floor to redevelop it as office space.
COPT buys new building
in Linthicum for $38M
COPT also disclosed that it acquired a new office building this month in Linthicum, a building that Rockville developer Opus East sold as part of its bankruptcy liquidation.
The deal includes a 156,000-square-foot Class A building next to Baltimore-Washington International Marshall Airport and a site available for retail development. Military contractor Northrop Grumman has leased 100 percent of the building for the next 10 years and was to move in this month.
The property, at 1550 W. Nursery Road, was the subject of a $25 million loan default foreclosure lawsuit by Citizens Bank of Pennsylvania.
The acquisition and the First Mariner deal are both part of COPT's strategy to buy up troubled properties at bargain prices, Griffin said.
"There is ample capital to acquire real estate," he said.
Nuclear commission expanding
to new building in Rockville
The Nuclear Regulatory Commission will expand to a new office building at North Bethesda Center, the mixed-use development rising at the White Flint Metrorail station in North Bethesda, the project's developers announced.
The Washington office of LCOR and USAA Real Estate will jointly develop the 14-story, 362,000-square-foot building across Rockville Pike from the NRC's headquarters under a 15-year lease with the General Services Administration. The deal is the largest office lease signing in suburban Maryland this year, according to the developers.
Groundbreaking is scheduled for March, with completion expected by July 2012. About 1,300 NRC employees will occupy the new building, which has been designed by HOK to meet silver certification standards as set by the U.S. Green Building Council.
"We're obviously pleased that the GSA selected our site, and are eager to develop a high-tech building that supports the NRC's needs," R. William Hard, executive vice president of LCOR, said in a press release. "We also look forward to building out the rest of North Bethesda Center in support of our joint development agreement with Metro and Montgomery County's plans for the area."
LCOR is master developer of North Bethesda Center, which is being constructed in phases on a 32-acre site halfway between downtown Bethesda and downtown Rockville. The urban-style, pedestrian-friendly development that links all the new buildings to the Metro station is planned to include 930,000 square feet of office space, 202,000 square feet of retail space, four apartment buildings and a hotel. North Bethesda Center is expected to generate about 5,400 jobs.
Phase 1 of North Bethesda Center, which includes Wentworth House apartments and a Harris Teeter supermarket, opened last year.
CBRE Government Services Group represented the joint venture in the lease transaction. Studley represented the GSA.
St. John acquires Aberdeen
properties for $14.9 million
St. John Properties announced that it has acquired a 60,000-square-foot office building and rights to develop a neighboring 10-acre site on the grounds of Aberdeen Proving Ground for $14.9 million in a bankruptcy sale as part of the liquidation of Opus East.
The properties are part of the Government and Technology Enterprise project, a 413-acre business community within the military base that Opus was developing before it declared bankruptcy in July. St. John, of Baltimore, was awarded exclusive development rights to The GATE project in September.
The complex is planned to include up to 2 million square feet of Class A office, research and development-flex space.
The single-story research and development building at 6240 Guardian Gateway was completed in June and is fully leased to CACI International. CACI, in turn, is subleasing 45,000 square feet of space in the building to the Army Joint Satellite Command.
The 10-acre adjacent development parcel, which is rough-graded and includes underground utilities, can support a three-story, 75,000-square-foot office building. St. John plans to start construction on this parcel in the near future.
Commercial real estate news items may be mailed to: Steve Monroe, The Business Gazette, 9030 Comprint Court, Gaithersburg, MD 20877; e-mailed to smonroe@gazette.net; or faxed to 301-670-7183.
The original version incorrectly attributed a statement by Randall M. Griffin to Edwin F. Hale Sr.
