Field of Dreams
Ousted as Port Covington’s developer, Marc Weller leaves behind a $660 million “game changer” in search of occupants
Hawked unsuccessfully as “Cyber Town USA,” a life science hub and a new Amazon headquarters, the scaled-back project now falls to others to market
Above: The lineup of buildings without tenants along East Cromwell Street at Port Covington. (Mark Reutter)
He first came to public attention in 2014 as the mystery buyer of industrial land at Port Covington for Under Armour founder Kevin Plank.
Then he emerged as head of an untested development company charged with erecting there a mini-city of soaring glass towers, shopping and entertainment emporiums, and 10,000 projected apartments for millennials and creatives – a waterfront oasis that owner Plank once referred to as “Dubai on the Patapsco.”
Now Marc Weller has gone back to Montgomery County, leaving behind 586,000 square feet of soon-to-be-completed residential units, 440,000 square feet of office space and 116,000 square feet for retail stores, all without tenants.
Can people be lured to live and work and shop on this isolated appendage of South Baltimore?
That’s the $650 million question – the projected cost of Phase 1 – that looms after Weller was dismissed last week as the master developer of Port Covington.
In a carefully crafted press rollout, Plank’s message was that Weller’s replacement by a team of “leading woman-owned and Black-owned development firms” would jumpstart a new era.
In fact, the switch is an attempt to shore up an unwieldy project whose uncertain future has set off alarm bells at Goldman Sachs, its biggest private investor.
The first canary-in-the-coal-mine sign of trouble was Margaret Anadu’s resignation.
As managing director of Goldman’s Urban Investment Group, Anadu had pumped $250 million into the project, a far larger investment than Plank’s own.
At the 2019 groundbreaking of Phase 1, she spoke passionately about her firm’s commitment, saying, “We don’t care what people say about this city. We believe in it, we believe in this community and all that it has to offer.”
Anadu’s sudden departure, announced in February, took Wall Street by surprise. Weller’s firing was the second shoe to drop.
Next week, when the local real estate industry gathers in Las Vegas for the Maryland Party, Weller Development will be notably absent as a sponsor.
MaryAnne Gilmartin, the woman-owned half of the team brought from New York and San Francisco, told the Baltimore Business Journal that her focus “is to lease the commercial space, fill the buildings with residents. . . and seeing that the retail is vibrant.”
“This is about responding to the market,” she said.
So far, the market hasn’t been kind.
Weller admitted that he hasn’t signed a single tenant for the five buildings that are expected to be completed and open for occupancy over the next 6-10 months.
This comes after six years of talk – Plank first announced his plans in 2016 – about Port Covington becoming “the new economic engine” for a struggling city.
• BREW’S DETAILED COVERAGE OF PORT COVINGTON: here and here.
Weller has hawked the peninsula as the emerging home of cybersecurity companies – “Cyber Town USA.” He proclaimed it a future hub of life science labs. He even got a former Baltimore mayor (Catherine Pugh) to beg Jeff Bezos to make it Amazon’s second HQ.
All along, he and Plank insisted that Under Armour would build an expansive global headquarters at Port Covington until the footwear company, no longer managed by Plank and suffering market setbacks, came out with a modest, suburban-looking HQ surrounded by parking lots.
Continuing to struggle financially, Under Armour yesterday disclosed that CEO Patrik Frisk is stepping down after just over two years, an announcement that followed news that the company posted a quarterly loss and missed revenue projections, which caused its stock price to plummet.
Pledges Atop Promises
“In two years, what you’re going to see here is a brand-new city,” Weller pledged before a clutch of admiring politicians at the groundbreaking podium he shared with Anadu. Leasing is “exacting where we need it to be,” Weller’s partner, Steven Siegel, promised more recently.
Every time a Baltimore company announces it will leave downtown for Harbor East or the suburbs – and lately there’s been a parade of such announcements – it’s a blow not only to the central business district but to Port Covington.
In 2018, Evergreen Advisors said it would definitely relocate to Port Covington. But four years and a pandemic later, the investment banker signed a 10-year property lease in downtown Columbia.
Clock is Ticking
Meanwhile, a financial clock is ticking thanks to the $137 million in tax incentive (TIF) bonds approved in 2020, part of the unprecedented $660 million in TIF financing awarded to Plank’s project by Mayor Stephanie Rawlings-Blake and the City Council in 2016.
Debt service payments of $5.4 million are due this September, with subsequent payments rising to $11 million a year before the bonds are retired in 30 years. (With interest, the $137 million in bonds will cost $252 million by the time they are retired in 2050.)
Increased property taxes collected from the value added to the land by the new buildings are supposed to pay off the bonds. But the city’s financial advisor, MuniCap, warned that a $47 million shortfall in property tax revenues would take place during the first 10 years of the project.
Goldman Sachs and Plank’s Sagamore Ventures were supposed to cover some of shortfall through a special tax assessed by Baltimore City. If, however, they fail to pay and the project defaults, Baltimore City effectively becomes the responsible party.
If the shortfall is not covered, Baltimore City effectively becomes the responsible party.
This little matter was never mentioned at the Board of Estimates meeting where Mayor Bernard C. “Jack” Young – a recent recipient of $11,000 in campaign cash from Weller and Siegel – pushed through the bond measure.
CLARIFICATION: If the Port Covington TIF goes underwater, Baltimore is not legally bound to cover the shortfall (as in the case of regular revenue bonds). But given the far-ranging repercussions of a default, including risks to the city’s own credit rating, if Plank and his associates fail to pay bondholders, Baltimore City becomes, in effect, the responsible party.
La Cité and Baltimore Hilton
Similar scenarios have played out before.
In 2015, the city sold TIF bonds for La Cité’s Center/West apartments in Poppleton. When occupancy of the buildings was delayed due to construction and insurance problems, city taxpayers were forced to pay bond interest charges.
Another example is the downtown Hilton Hotel. Last August, the city transferred $9,517,625 to pay the principal and interest on TIF bonds due for the city-owned hotel. In addition, the city transferred $3,377,004 to pay the hotel’s property taxes due in September.
Currently, the most pressing issue facing Port Covington is getting the initial tranche of buildings occupied and stabilized, so that operating income can support the debt service.
This typically occurs when about 90% of the space is rented.
Which leaves MAG Partners and MacFarlane Partners, the new master builders, and JLL, the project’s sales and leasing broker, with the formidable challenge of attracting “pioneers” to a remote locale during uncertain economic times.