A developer plans to convert the historic Equitable Building into 180 residential apartments, the latest Baltimore development designed to capitalize on trends that predict increased urban living.
JK Equities, a real estate company with offices in New York and Chicago, purchased the 10-12 N. Calvert St. property for $7.2 million last month from Equitable Holdings Trust.
The company plans to invest $32 million to convert the nine stories of office space into apartments, spending roughly $178,000 per unit, said Leo McDermott, a real estate agent for Transwestern, which represented the seller on the deal.
The property also drew interest from a buyer who would have kept the space for offices, but JK Equities' offer was higher, McDermott said.
"They're betting on a pent-up demand for additional apartments in the price range they're going to be delivering with the building," he said. He said he did not know the specific range.
The JK Equities website said the apartments would be "market-rate," but JK Equities Principal Jerry Karlik did not respond to requests for comment.
The Downtown Partnership of Baltimore Inc. has projected demand for 5,800 new apartments in the next five years, based on demographic trends that show Millennials wanting to live downtown.
In 2013, there were 533 residential units under construction in downtown Baltimore, with about 2,500 planned for completion by 2017, according to the organization.
Kirby Fowler, president of the Downtown Partnership, said he was not worried that new apartments flooding the market would end up without people living in them.
"There will be some period of time for all these buildings to adjust, but if you were in any other sector and you're looking at buildings that were 100 percent occupied, you'd build more," he said. "I think the market has given us a very strong indication of what we should build."
Other major apartment developments include the 445-unit project at 10 Light Street and projects at 520 Park, the former Baltimore Life Insurance Co. at Charles and Saratoga streets and the former Federal Reserve/Provident Bank building at Lexington and Calvert streets.
Plans for the Equitable Building apartments will be submitted in the first few months of 2014 and the units are expected to be ready in March 2015, McDermott said.
Many of the current tenants have leases that will expire on their own and not be renewed, he said. The ground floor will remain retail space.
About half of the 180,000 square feet of office space was empty at the time of last month's sale, McDermott said. Before 2009, the building was roughly 90 percent occupied, according to information marketing the property.
"The question mark is how much demand is out there and if there's plenty of demand, then all the developers that are currently converting these buildings … are going to be very successful," said McDermott, adding that JK Equities likely will take advantage of a historic tax credit to help finance the project. "We won't know the answer to how much demand is out there … until it all comes online."
More and more of the developments, including the Equitable Building's, are being driven by out-of-town investors, said Fowler, who pointed to a new city tax credit that encourages residential developments as one possible driver.
"It used to be a regional developer's game, but now we're appealing to outside the region," he said. "I think people outside Baltimore sometimes have a higher opinion of the Baltimore real estate market than we sometimes do."
Opened in 1891, the Equitable Building, which withstood the Baltimore Fire of 1904, last sold on the open market in 2004 for $11.5 million. The previous owner, Equitable Holdings Trust, acquired the property in 2012 for $6.5 million from a related party, according to state land records.
Over the past year, the asking price fell from $10.25 million, said McDermott, adding that he had expected a drop.Copyright © 2014, The Baltimore Sun