The Downtown Partnership encouraged the building's owner, the Nellis Corp., and controlling tenant, Bank of America, to consider a new life for the structure, Fowler said. Both parties understood, and the building was sold to a Virginia real estate firm, Metropolitan Partnership Ltd.
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Metropolitan's principal, Cary Euwer, did not respond to voice mail and email inquiries Friday. Fowler said Metropolitan is still planning the conversion and has not arrived at an initial estimate of the cost. The financing plan for the conversion is dependent on a new tax credit that Mayor Stephanie Rawlings-Blake is expected to introduce to the City Council in January, Fowler said.
The mayor's office has declined to provide details about the incentive plan, saying the legislation still is being drafted. In October, Rawlings-Blake told the annual meeting of the Downtown Partnership that the credit would be given to "newly constructed and conversion residential projects in downtown."
The legislation would control the rate at which the taxable value of a property increases over a 15-year period, Fowler said, and is expected to apply to developments that create 50 or more apartment units.
David Hillman, head of Southern Management Corp., has been a proponent of a tax incentive for apartment conversions. A blanket credit for all apartments will eliminate the subjective nature and "political intrigue" that is now required to get an abatement, he said.
Hillman's company has been at the forefront of "adaptive reuse" in downtown Baltimore. Among other projects, Southern Management converted the Standard Oil building into The Standard and the Hecht Co. store into The Atrium at Market Center about a decade ago.
Hillman said these apartments are successful in terms of occupancy, but he cannot charge enough rent for them to make money. The company loses about $2 million a year on 39 West Lexington, the former Baltimore Gas and Electric Co. headquarters that was converted into luxury apartments, because the building is underwater, meaning it's assessed for more than its worth, he said.
Although 15-year tax credits would help developers deal with high tax assessments during a project's early years, Hillman said credits shouldn't be relied on when financing is being planned.
"If a project is going to need that incentive to make it happen, it just shouldn't happen," he said.
The two other adaptive reuse projects announced recently will use historic tax credits, intended to provide an incentive to rehabilitate older buildings, but won't rely on Rawlings-Blake's newly proposed apartment construction credit, the developers said.
PMC Property Group is negotiating with the Baltimore Development Corp. to purchase six vacant, city-owned buildings near the corner of Calvert and Lombard streets. A purchase price has not yet been established, said Steven Bloom, the local operating partner for Philadelphia-based PMC.
PMC focuses on adaptive reuse, Bloom said. The firm has converted several buildings in Baltimore, including the Abell Building at 1. S. Eutaw St., that are all at least 98 percent occupied, he said.
"We would not be doing this if we didn't think people would move in," Bloom said. "It's fun to live in century-old buildings."
In addition to the six buildings it's negotiating to buy, PMC is in the process of refurbishing 521 St. Paul St. and 301 N. Charles St.
Outside of The 401, in Mount Vernon, Owings Mills-based The Time Group is converting a former Hochschild Kohn department store warehouse into about 340 apartments. It was most recently occupied by an insurance company, which moved out in 2011.
"We're going to be cutting a 5,000-square-foot hole into the middle of the building" to create a courtyard and "double-loaded corridors," with apartments on both sides of a hallway, said Dominic Wiker, the firm's development director.
The renovation project, he said, will cost about $30 million. Construction is expected to begin early next year and residents should be able to move in by spring 2014, he said.
With all of the new downtown residents expected because of these new apartments, Fowler said, the next step is ensuring that the area's nonresidential offerings are up to snuff.