Constellation, Hale reach settlement over Canton Crossing 

Posted: 11:43 am Wed, October 28, 2009
By Robbie Whelan
Daily Record Business Writer

Constellation Energy Group Inc. has settled a $65 million lawsuit brought against the company by banker and developer Edwin F. Hale Sr., coinciding with the news that Hale has sold his entire interest in his proposed $1 billion Canton Crossing project in Southeast Baltimore.

Kenneth B. Frank, an attorney with The Murphy Firm, which is representing Hale in the matter, said Wednesday, “I believe that case has been settled,” but declined to provide details.

“I would imagine that you will see a dismissal,” he added.

An official in the chambers of Baltimore Circuit Court Judge Stuart R. Berger confirmed that attorneys representing both parties had contacted the court indicating that a settlement had been reached. A Nov. 17 hearing will remain on the court’s docket until paperwork surrounding the settlement has been filed, which is expected to happen in the next few days, the official said.

The lawsuit, filed in July, dealt with a $19 million power plant that Hale built on the site in 2006 as a way of distributing heat and electric power to prospective tenants at Canton Crossing.

That arrangement turned out to be in violation of state energy regulations, which say that only a regulated utility can distribute power, and two residential developers pulled out of arrangements to build apartment and condo buildings at Canton Crossing, citing complications with the energy deal.

Hale sued Constellation, which owns Baltimore’s regulated power utility, Baltimore Gas & Electric Co., in July, alleging that the energy giant misled him into building the plant. Constellation shot back that Hale had given up his right to sue the company in a forbearance agreement he signed in June 2008.

While the case was pending, Hale, who is CEO of First Mariner Bancorp, defaulted on an $84 million loan from French bank Natixis SA, which had financed his First Mariner Tower, the 17-story office building that is the only completed element of the Canton Crossing project.

The building in question houses the headquarters of 1st Mariner Bank, and is over 90 percent leased to tenants including CareFirst BlueCross Blue Shield, Prometric and Comcast Spotlight.

Court documents filed last week showed that Natixis Real Estate Capital, the bank’s New York-based lending arm, claimed that Hale still owed $76.59 million on the $84 million note at the time of its maturity in August and began foreclosure proceedings on the 474,000-square-foot office tower.

Most recently, the debt on the property was sold to Columbia-based Corporate Office Properties Trust, a mezzanine lender on the Canton project that held a stake in the building valued at between $25 million and $27 million.

A source confirmed the sale of the mortgage to The Daily Record last week, but late Tuesday, COPT announced its acquisition of the building, and in addition, a parking lot, a “utility distribution center,” and four waterfront lots, along with their development rights.

COPT CEO Randall M. Griffin, said Wednesday that Hale released Constellation from the lawsuit once COPT finalized the purchase of the building, the power plant and all the equipment inside it.

Griffin also said that COPT’s purchase price of the mortgage was “discounted” by the lender from its original $84 million value, but that Hale had “not really” paid off any of the principal. The company is expected to discuss further details of the deal in its third-quarter earnings conference call Thursday.

“Our first program is to stabilize the property, finish leasing it up, and make sure we give it the kind of service we’re used to providing to our tenants,” he said. “For us, we’re a $4.5 billion company, so it’s not that big a transaction for us. … We’ll have to wait and see if we want to develop any or all of it.”

A planned unit development agreement approved by the city allows for 500,000 square feet of office, 150,000 square feet of retail, a 450-room hotel and a marina on the four waterfront lots.

In 2008, top city officials attended an event at which Hale announced that he was more than doubling the size of Canton Crossing, adding a 31-acre former Exxon Corp. loading dock on which he planned to build a retail “Main Street.” Owings Mills-based developer Greenberg Gibbons Commercial was slated to handle the retail portion of the project, which was rumored to include a Target store and supermarket chain Harris Teeter.

Neither Hale’s spokesman nor an official from Greenberg Gibbons immediately returned a phone call seeking comment Wednesday, and Hale’s attorney, Michael G. Gallerizzo declined to comment.