BALTIMORE-Philadelphia-based ARCWheeler Development & Hospicomm have secured a $48-million construction loan from Capmark Financial Group to acquire and redevelop one of Baltimore’s historic office landmarks: the B&O Building on North Charles Street. Development–which is anticipated to cost between $55 million to slightly more than $60 million–is scheduled to begin in October.

Development plans call for the 220,500-sf, 13-story building to be transformed into a mixed-use office building with a 196-key boutique hotel and restaurant. Currently the class B office building is only half occupied, according to Andrew Benioff, managing partner at BlueStone Real Estate Capital, a real estate investment bank that secured the financing. “It is an underperforming building,” Benioff tells, “but absolutely beautiful.” Some of the current tenants are leaving, he says, and the remaining ones will be consolidated onto approximately three floors.

According to ARCWheeler’s website, the B&O project will be the first of the developer’s “10″ boutique hotel brand. Once completed, the building will consist of one-third office space and two-thirds hotel and restaurant. The exterior, which features granite from New Hampshire, bedford stone from Indiana, terra cotta tile trim, and seven different kinds of marble imported from six countries, will be preserved. The building was designed by architect James Gamble Rogers. In 2001 the City of Baltimore’s Commission for Historical and Architectural Preservation and the Maryland Historical Trust designated it one the city’s ten most historically consequential buildings.

The loan to cost ratio for the four-year loan is 80%, and can be extended at the option of the borrower with two 12-month extensions, according to BlueStone. There is also an IO period during the renovation and for the first year ramp up, Benioff says. The financing was hammered out four, five months ago, he adds, and just now closed. “It would have been a lot more difficult to get these terms in the current environment,” he says.

Because B&O is a historic landmark–it was built in 1906 as the headquarters for the Baltimore and Ohio Railroad–the tax credit component of the financing was also important to the deal’s structure, Benioff adds. “Fortunately ARCWheeler has a lot of experience with tax incremental financing.”

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