DATE: Thursday, September 4, 1997           TAG: 9709040476

SECTION: BUSINESS                PAGE: 1D   EDITION: FINAL 

SOURCE: BY MEREDITH COHN, STAFF WRITER 

DATELINE: NORFOLK                           LENGTH:   67 lines

INVESTORS SUE EACH OTHER OVER WORLD TRADE CENTER'S EARLY LOSSES

The commercial real estate collapse of the early 1990s isn't just a bad memory for some local real estate investors.

Members of a partnership that built one of downtown Norfolk's premier office addresses, the World Trade Center, but gave up the building before turning a profit say they're still reeling from the effects.

In documents filed last month in Norfolk Circuit Court, 11 of the investors claim four other partners didn't pay their share of loan and operating expenses. They're seeking to recoup the money they say they paid on behalf of their partners.

Periodic cash infusions the partnership did make were not enough. In 1993 the investors decided to cut their losses and hand ownership to Aetna Realty Investors Inc. of Hartford, Conn., which financed the building, according to Hunter A. Hogan Jr., one of the investors.

The investors had been executives of the Goodman Segar Hogan Inc. real estate firm, which now manages the building.

``We all put our money in, but some couldn't pay so easily or could pay but didn't want to,'' Hogan said. ``We paid for them.''

According to the suit, the investors claim the others owe them a total of $276,078.70, with Peter McMillan and Richard McNamara each owing more than $100,000. Both declined to comment. The two others, John Millar and Miles Donovan, could not be reached for comment.

While all the original investors lost money, Aetna, which still owns the building, is making a profit, according to Donald R. Crigger of Goodman Segar Hogan Hoffler. The building is 89 percent occupied, the average for upscale Class A buildings in downtown Norfolk.

Some of those involved in building and managing the World Trade Center, who had big expectations for the complex and other buildings opened around the same time, say the venture was a victim of an economic slump and an oversupply of office space.

The first phase of the World Trade Center was completed in 1983, adding about 200,000 square feet of top-notch office space to Norfolk's downtown. Hogan said the trade center enjoyed a 98 percent occupancy rate.

The partnership's mistake was continuing to build, Hogan said. The East Wing of the crescent-shaped building, at Waterside Drive and Main Street, opened in 1986 with 167,000 square feet. That was about the same time Towne Point Center, Dominion Tower and Norfolk Southern Tower came on line, adding about 1 million square feet of Class A space to the market.

Deborah K. Stearns of Goodman Segar Hogan Hoffler said only about 35 percent of the space was pre-leased. ``That meant the product didn't lease up and there was insufficient revenue to meet the debt service and operating costs.''

The building hit another bump in the road in 1993, when a large tenant moved out. With other vacancies, that left the World Trade Center with 160,000 square feet of space empty.

Occupancy has crept up about 10 percent a year, and Stearns said the building now meets the expectations investors had for it more than a decade ago. Its tenants include The New York Times Co., Itribe, the Virginia Port Authority, Central Fidelity and Vandeventer Black Meredith & Martin.

Hogan said he's not frustrated by the experience. ``All the big buildings, the Class A buildings, all went through the ringer then,'' he said.

The partnership no longer plays any role in the building's management and is being dissolved. The partnership's lawyer, Beverlee R. Peters, said she's waiting for a response from the defendants.

After 15 years, Hogan said, ``I hope we get it all cleaned up this time.'' ILLUSTRATION: STAFF/File color photo

The World Trade Center is 89% occupied, the average for upscale

Class A downtown buildings.

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