Gov. O'Malley looking for ways to maintain ownership of Baltimore's

Daily Record, The (Baltimore), Mar 26, 2007 by Jen DeGregorio

After announcing last month that the state would maintain ownership of Baltimore's World Trade Center, the administration of Gov. Martin O'Malley is looking for ways to pay for the troubled office tower.

The 30-year-old building, owned by the Department of Transportation, needs renovations that could cost as much as $25 million, according to a source familiar with the property. It also needs operating funds to keep it running through the end of the fiscal year, which ends June 30. The administration of former Gov. Robert L. Ehrlich Jr. planned to sell the World Trade Center, and the General Assembly budgeted only enough money to run it through the third quarter of this year.

Not only that, but the building is not earning enough rental income to pay for itself. Many tenants have moved out in the last year, leaving the building half vacant and in the red by about $42,300 last year, according to data from the Department of Transportation.

The World Trade Center, located at Baltimore's Inner Harbor, costs an average $3.3 million to operate each year between 2004 and 2006. But this year, the building is only expected to bring in about $1.5 million in revenue, according to the fiscal 2008 budget drafted by the O'Malley administration.

The state is looking to combat those problems by hiring a private brokerage company to market the building to future tenants. Sam Minnitte, the transportation department's real estate director, said the department would likely issue in the months ahead a request for proposals from interested firms.

"Transportation Secretary [John D.] Porcari and Gov. O'Malley have both said they want to see the building operated in the highest of standards and to be a centerpiece of Baltimore's commercial real estate market," Minnitte said.

In the late 1960s, the state commissioned the creation of an iconic building to house port-related businesses in Baltimore. Completed in 1977, the 28-story, pentagonal skyscraper designed by I.M. Pei overlooks the Inner Harbor from a prominent spot in the middle of the city's main tourist destination.

But those familiar with the property say budget pressures and bureaucracy have kept the state from investing in the building's upkeep. Its heating, ventilation and air-conditioning system is obsolete and needs to be replaced. The building also needs major upgrades to make it compliant with the federal Americans with Disabilities Act, among other issues.

The World Trade Center also suffered major flood damage during Hurricane Isabel in 2003, which displaced many of the building's tenants. Its electrical hub and other systems are still located in the basement level, leaving a chance for the building to sustain more damage during another storm.

"The building has acquired a reputation as being poorly operated," said Robert Manekin, senior vice president of the Baltimore office of The Staubach Co., a real estate firm that has represented businesses with offices inside the World Trade Center.

When the Ehrlich administration attempted to sell the building in late 2005, it received harsh criticism from legislators who said the building's high vacancy degraded its value. Comptroller Peter Franchot, then a delegate from Montgomery County, said the state should keep the World Trade Center as a public asset. O'Malley agreed, announcing soon after taking office that the state would do so.

But Manekin thinks the state will have trouble finding new tenants without investing "serious money" to improve the building, which has to compete with the city's newer office buildings.

"I think a tenant would look at poor HVAC, a questionable water system - as being somewhat problematic," he said. "I think it's going to be a real challenge to get the building filled back up."

The transportation department is studying the World Trade Center to determine what repairs are necessary, Minnitte said.

Before the state can even think about a renovation, however, it needs money to keep the building open through the end of the year. To that end, the transportation department has requested $3.1 million from the General Assembly, which has yet to be approved. The state is requesting another $4 million for the building's operations during fiscal 2008. The department could later request more money to pay for the private brokerage company it is considering hiring, Minnitte said.

But with the state facing a structural budget deficit of more than $1 billion, it is unclear where the extra money will come from.

M.J. "Jay" Brodie, president of the Baltimore Development Corp., the city's economic development arm, said building upgrades should be on the agenda if the state wants to the World Trade Center to be a success.

"I think what matters is that the building is well taken care of and filled with happy tenants," Brodie said.

Manekin thinks the World Trade Center could be a premier office location, but only if the state invests to fix it up and hires someone to give it proper attention.

"One of the best things the state can do is to hire a competent, locally based, third-party leasing and management organization with a demonstrated track record of results," Manekin said. "The state should not be in the business of operating an office building."