1,000,000 SF BUSINESS PARK, SECURITY BLVD, BALTIMORE, MARYLAND
Not all deals are winners, and this deal is a good example of that. Equitable Life was selling its 1,000,000 square feet of office and industrial buildings at theSecurity Blvdexit off the 695Baltimore Beltway. We made what we thought was a low-ball offer of $63,000,000. To our surprise the offer was accepted. It wasn’t to long after we took title that we began to discover the error of our ways. A 100,000 square foot office building occupied by the Federal Government was declared a “sick building” by our tenant. It seemed that an unusually high percentage of the building’s occupants where coming down with colds and flu. The claim was that the HVAC system was the likely culprit. We did studies, upgraded the system and all to no avail. The tenant broke the lease and no new tenants were interested in the space. We had material problems of one sort or another with almost all of the twenty buildings in the portfolio. Within a year we were out the deal, with a loss of several million dollars. The lesson learned was that buying properties at a nine cap on existing rent – at less than 50% of replacement cost, was not necessarily a good idea. The buildings were not new and were not particularly well maintained. The neighborhood had never been prestigious and was trending down. The primary tenants were the federal and state governments and they had no particular reason to remain in the location or in the buildings. Live and learn.