City leaders said Tuesday that they were disappointed to learn the struggling Harborplace was taken out of its owner’s control but hope the move will lead to a new vision for one of Baltimore’s top Inner Harbor attractions.
A Baltimore Circuit Court judge appointed a receiver to oversee the retail pavilions on Pratt and Light streets, taking the center out of the hands of owner Ashkenazy Acquisitions Corp., whose affiliate defaulted on the mortgage loan. The New York real estate company with a portfolio of trophy properties bought Harborplace in 2012 from General Growth Properties for $100 million.
"It is disheartening that Ashkenazy Acquisitions Corp. did not adequately invest in, manage or maintain Harborplace to enhance its destination status or appreciate the important role that it has played in Baltimore for decades as a cultural and economic jewel,” Donald C. Fry, president and CEO of the Greater Baltimore Committee, said in a statement Tuesday.
Under a May 30 consent order signed by Judge Gregory Sampson, New Jersey-based IVL Group LLC will take possession of the center as its receiver and manage and lease it on behalf of Deutsche Bank Trust Co. Americas, the trustee for mortgage holder UBS-Barclays Commercial Mortgage Trust.
Fry said the GBC is monitoring the situation and hopes to work closely with any new owner.
Receivership brings uncertainty, he said, but “Harborplace has tremendous potential and hopefully will attract a new owner with a vision to restore and build upon the iconic Harborplace brand.
City Councilman Eric Costello, who represents the Inner Harbor area, also expressed disappointment.
“Harborplace is a critically important asset for downtown and especially for the Inner Harbor,” Costello said. “My hope is that out of this will come a property owner who is going to do the things that are necessary to ensure that Harborplace is successful … I’m profoundly disappointed that Ashkenazy has not figured out how to make this work.”
Representatives of Ashkenazy and IVL Group did not return several requests for comment Tuesday.
Ashkenazy Acquisition was known for enhancing trophy properties when it bought Harborplace and Cross Keys, two of Baltimore's most popular centers. Seven years later, tenants have fled, the owner is on the verge of default and the centers face an uncertain future in a shifting retail landscape.
Deutsche Bank Trust had filed an emergency petition in April to appoint a receiver, saying Ashkenazy defaulted on its $76 million loan by missing a payment due March 6 and by failing to pay a judgment against it in a 2018 lawsuit. In that case, tenant Bubba Gump Shrimp Co. alleged that Ashkenazy failed to maintain common areas of the Light Street Pavilion and protect the shopping center and won a $1.2 million judgment in Baltimore Circuit Court. Deutsche Bank notified Ashkenazy on March 28 that it was in default.
Deutsche Bank “believes a receiver can step in and help to ameliorate Harborplace’s unfortunate decline over the past several years,” the petition said. “Harborplace was once called ‘the crown jewel of Charm City,’ but no more.”
But one longtime developer and investor in the city’s downtown cautioned that Harborplace’s owner should not be judged too harshly.
“It’s a very sad day for the city, and I wouldn’t be too quick to beat up on the developer,” said David Cordish, chairman of Baltimore-based The Cordish Cos. and developer of Power Plant and Power Plant Live at the Inner Harbor, in an email. “There are larger trends at play that will bedevil the next owner.”
Not long ago, he said, few would have imagined that Pimlico Race Course’s owner would be fighting to move the Preakness from the city or that the city’s “crown retail jewel” would be in receivership, but at the same time, “encouraging things are happening in the city.”
“With courageous political and business leadership, the city is poised for its second dramatic renaissance, and if that occurs, we’d be honored to participate in the rebirth of Harborplace,” said Cordish, who did not elaborate.
Ashkenazy had begun renovations to modernize Harborplace’s appearance, but the work dragged on and several longtime tenants had moved out amid the delays. Tenants such as Urban Outfitters, Five Guys, Noodles & Co., La Tasca, Edo Sushi, Lenny’s, Fire & Ice and The Fudgery closed. Work had been completed recently on the Pratt Street pavilion and new leases were signed with Build-a-Bear, Mason’s Famous Lobster Rolls and Banana Republic, which moved from the Gallery mall across the street.
A Pratt Street redevelopment plan issued by the Downtown Partnership in 2008 had recommended an update of the pavilions’ retail mix and overall design to appeal to a broader range people, including local residents, said Kirby Fowler, president of the partnership. He said Ashkenazy had embarked on such improvements with the recent renovation of the Pratt Street Pavilion.
Gary Downes, 68, of Baltimore, said he remembers when Harborplace opened in 1980. For the first two decades or so, he said, “it was nice. Everything was filled.”
But inside Harborplace on Tuesday, Downes began to point to vacant spaces that used to be sushi restaurants, retail shops and burger joints. He spoke fondly of the days of when The Fudgery launched the careers of Baltimore R&B bands such as Dru Hill before it closed in September.
“Look at this. All of these places are gone,” Downes said. “It’s not like it used to be, and you know something is wrong when you see all these [stores] closing up.”
A spokesman for Mayor Bernard C. “Jack” Young said the mayor had no comment Tuesday on the receivership because it’s an ongoing legal matter.
“As for the venue itself and the area, we’ve seen a number of new businesses that are located there, and recently M&T Bank announced the placement of a pop-up [shop], so we know there’s a great deal of interest in the harbor,” said Lester Davis, the mayor’s spokesman. “And that particular business is going to be a draw. The legal matters will work their way through the proper channels, but in terms of a destination it remains a strong draw.”
The CEO of Mason’s Famous Lobster Rolls, an Annapolis-based restaurant chain specializing in variations of lobster rolls that opened an eatery at Harborplace in March, said in an email it would be premature to comment on the landlord’s woes. Mason’s Famous’ owners were waiting to consult with their attorney, Daniel Beck said.
But he called the situation “a bit of a surprise for us.”
Sean Barrie, a research analyst with New York-based Trepp LLC, which tracks commercial loans, said it’s fairly common for loans that had been transferred to a “special servicer,” as the Harborplace loan had been, to then go into receivership.
“This makes it easy to allocate funds if need be, if they are trying to beef up marketing or re-tenant the property,” Barrie said.
It’s the job of the special servicer, in this case Midland, to review market data, the tenant roster and performance and work out a strategy to bring the loan current on its payments. In general, commercial loans made after 2010, when lenders tightened lending standards in the wake of the recession, have a better chance of not going into default or spending less time in delinquency than earlier loans, Barrie said.
“This is a property in a city center with a good location,” he said.
Fowler said the court action is a positive step, but “receivership prioritizes creditors, not the best interest of the Baltimore community. At this point, an outright sale of the property to experienced and committed owners is the best way forward."
The trustee also recently discovered that Ashkenazy allowed multiple vendors, including several responsible for operations and safety at Harborplace, to go unpaid for months because of insufficient monthly rent to cover expenses, the petition said. Deutsche Bank was given no assurance if or when those expenses would be paid.