Baltimore County Office Building's $20M Loan Lands On Delinquent List
A loan granted less than two years ago to finance the $29M purchase of an office complex in the Sparks section of Baltimore County is listed as at least 30 days delinquent, according to Morningstar.
The delinquency for the loan, backed by the Tower Point at the Highlands office complex, isn't a cause for concern on its own, according to Morningstar. But the late payment, combined with the property's occupancy rate declining from 90% when the lender issued the loan to 77% today, caught the attention of analysts.
"A 30-day delinquency is not the end of the world. It can happen due to administrative issues, timing issues, etc. Sixty days delinquent is more of an industry standard as a sign of distress. In this case, the delinquency tipped off our analyst that the occupancy rate had dropped, which made him look further into it," Morningstar Head of Commercial Real Estate Analytics David Putro said in an email.
Argentic Real Estate Finance approved the loan for Tower Point in June 2021, according to financial documents filed with the Securities and Exchange Commission. At that time, one of the largest tenants, Trident Care subsidiary Symphony Diagnostic Services, leased more than 39K SF of office space. But since the building's purchase, Symphony Diagnostic's footprint declined to 18,500 SF, according to Morningstar.
Additional significant tenants include Fundamental Administrative Services, a tenant since 2009 that leases nearly 75K SF on a deal set to expire in December 2025. Also, Fila USA has rented more than 23K SF at Tower Point since early 2011. That agreement is slated to expire in July 2024.
According to SEC filings, the building’s owner combined more than $12.4M in equity with the $20M loan to purchase the two-building office complex in 2021. The 163K SF complex was built in the 1990s.
Financial filings and Maryland property records list the building’s owner as Towers Point Lots BDEF Property Owner LLC. According to property records, the entity's address is 40 Airport Road in Lakewood, New Jersey.
SEC filings list Yakov Prager as the loan's guarantor and describe him as an investor in commercial real estate specializing in office, industrial and multifamily properties.
A 2008 Philadelphia Inquirer article names Prager as a real estate investor whose Lakewood, New Jersey-based firm Lingwood Partners Inc. purchased more than $200M in eastern Pennsylvania office real estate since 2007. Those deals included the $24M purchase of 2621 Van Buren Ave. in the Valley Forge Corporate Center.
Greenfield Partners previously owned Tower Point, and it purchased the property from Equus Capital Partners Ltd. in early 2013 for $23.7M. According to the Baltimore Business Journal, Cushman & Wakefield arranged $17M in financing over five years with J.P. Morgan as part of that deal.
News of the delinquent office loan comes as the Baltimore-area office market has struggled with high vacancy. That increase in empty offices is tied to companies, in the wake of the coronavirus pandemic, shrinking spaces after adopting remote or hybrid working that requires employees to spend less time in the office.
A recent report by Cushman & Wakefield classified about 3% of the outstanding office loans in Baltimore as troubled, the eighth-highest percentage of the markets it studied.
However, Abby Corbett, Cushman & Wakefield's head of investor insight and an author of the report, told Bisnow earlier this month the percentage of outstanding loans on Baltimore office properties isn't a reason for immediate concern.
"I wouldn't say it's alarming yet," Corbett said. "Three percent is still very low, particularly if you look at ... the historic perspectives of where we had trouble during the [2008 financial collapse]."
