Heather Harlan
Staff  Courtesy StevenW

Constellation Energy Group Inc., the parent company of Baltimore Gas and Electric Co., is expected to take over Sierra Military Health Inc.'s lease at 750 E. Pratt St. in downtown Baltimore, real estate sources familiar with the agreement said.


The deal would increase the company's presence from roughly 87,000 square feet of space to 107,000 square feet of space in its new headquarters building at the corner of Pratt and President streets.

Not only would the transaction rescue the faltering Sierra from financial obligations, but it would also cements Constellation's place as one of the city's only growing companies in a sluggish commercial real estate market.

"Constellation Energy currently represents one of a limited number of large tenants that is actually growing and expanding in the central business district," said Robert A. Manekin, managing principal of Robert Manekin Partners LLC, a Baltimore-based commercial real estate firm. Manekin previously handled the listing for 750 E. Pratt St.

Clay C. Perry, a spokesman for Constellation Energy, confirmed the company's continued interest in 750 E. Pratt St., and also added that the company is considering Sierra's additional space next door in the Candler Building at 111 Market Place. Constellation already has its trading floor in the Candler Building, confirmed Matt Muller, senior property manager for REIT Management & Research LLC that runs the office complex for owner HRPT Properties Trust.

Also eyeing Sierra's 83,000 square feet of space in Candler is Johns Hopkins' Public Health division, already a tenant in the building, commercial real estate brokers said this week.

Muller said nothing has been signed and as far as he is concerned, Sierra is still responsible for its lease. "We're not affected by their closing," Muller said. "That's why they're trying to sublease their space."

Baltimore-based Sierra Military Health Services Inc. plans to shutter its core operations in August. The company learned last summer that it had lost its bid to provide Tricare benefits in a region that would have expanded its existing territory by 10 states. Sierra filed a protest to the decision in September, but received notification in December that its paperwork had been denied.

With the government contract its sole piece of business, Sierra was left with no other choice than to disband and sublet its space. The conclusion to shut its doors came less than two years after Sierra agreed to take an entire office floor in what was then considered downtown's newest office tower, 750 E. Pratt St., for its headquarters.

The Baltimore Business Journal first reported the 10-year deal for 20,000 square feet of space on the 14th floor in August 2002. At the time, the company had threatened to move its nearly 600 employees out of the city. City and state incentives, however, convinced the company to remain downtown.

In March, Sierra repaid $1.45 million in combined loans from the State of Maryland and Baltimore City. The loans -- granted through the Maryland Department of Business and Economic Development and the Baltimore Development Corp. -- carried favorable interest rates and would have been partially forgiven if Sierra had achieved certain hiring targets. While the state loaned the company $280,000, the city offered $1.17 million.

Constellation saw an opportunity arise from Sierra's situation, commercial real estate brokers said. The energy company recently reported higher earnings for the fourth quarter, even though special items, including Hurricane Isabel costs, led to lower earnings for 2003.

Constellation reported fourth-quarter earnings of $119 million, or 71 cents per diluted share, up from $65 million, or 39 cents per diluted share, in the same period last year. For the year, Constellation reported earnings of $277.3 million, down from $525.6 million in 2002.



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Courtesy StevenW