Three years after city officials approved hundreds of millions in public financing, there’s a daily hum of earth movers at Port Covington’s riverfront site in South Baltimore.
The bulldozers and dump trucks are preparing dozens of once-industrial acres along East Cromwell Street for the massive mixed-use project’s $500 million first phase, which is slated to include 1.1 million square feet of offices, apartments, shops and parks.
Construction of the five buildings in the first phase is scheduled to begin in January. Those buildings should be ready in 2021, the developer said Thursday.
While work appears to be in full swing, questions remain, including who will occupy all that space beyond the three commercial tenants who have been announced so far. And city economic development officials aren’t saying why they haven’t yet sold the bonds to pay for needed infrastructure in the area just off Interstate 95. The area’s city councilman said the first sale is expected in February.
Those involved in the project remain as bullish as ever.
“Day One, Maryland will be the reigning largest ... cybersecurity hub in the world,” said Mike Janke, co-founder of DataTribe, a firm based in Fulton in Howard County that’s expecting to be among the first wave of tenants — all cyber-related — when the first buildings open. “And that’s just the initial move-in.”
Port Covington is among the most ambitious projects the city has undertaken, stoking a contentious debate in 2016 about subsidies that are likely to exceed $1 billion, including the city’s pledge of $660 million in bonds.
Also included in that subsidy package were other state and federal aid, mainly for roadwork, but also for things such as job creation. More recently, the state included the 235-acre project in the new federal Opportunity Zone program that offers tax breaks to investors for rolling their money into distressed neighborhoods.
Such subsidies and incentives offer a massive lift that observers say could help the project succeed after some fits and starts.
The project was conceived initially by Kevin Plank, founder and CEO of the sports apparel brand Under Armour, who assembled land through his Sagamore Development company partially for a new headquarters campus. Sagamore began acquiring land in Port Covington at least five years ago.
Under Armour purchased roughly 50 acres there from Plank for $70.3 million in 2016, just as the company’s fast sales growth ground to a halt, pinching profits and sending the stock into a tailspin. Company stockholders sued him last year, accusing him of breaching his fiduciary duty to the company and shareholders and unjustly enriching himself.
Plans for the headquarters remain in limbo. The company said about 20% of the local workforce is located in a single building at Port Covington but there is “no timeline” for moving the rest.
This week, Under Armour officials acknowledged that federal investigators are probing the apparel firm’s accounting practices.
City officials said Under Armour’s troubles have no effect on Port Covington, where the development team is a separate legal entity. The only common denominator is Plank, who owns a large stake in both.
The project is now overseen by Weller Development, headed by Marc Weller, a partner in Plank’s Sagamore Development. In 2017, the New York investment bank Goldman Sachs invested $233 million and became a partner in the Port Covington project.
Weller was not available to comment for this article, and Goldman Sachs did not respond to request for comment, but Weller Development did respond to some questions with a statement.
“We have tremendous momentum on the leasing front with interest from many diverse companies, including headquarters users and technology and cyber-security companies filling in our ecosystem,” the Weller statement said.
For now, the site remains largely empty, except for Plank’s whiskey distillery and tavern and the printing plant and offices of The Baltimore Sun, which has a long-term lease for its building. On a parcel across Hanover Street, the Plank development team turned an old bus depot into a startup business space and Under Armour innovation center called City Garage. Last year, a Weller company opened South Point, a pop-up open-air restaurant, bar and event space.
Efforts by Plank and city officials to lure Amazon’s second national headquarters to Port Covington were unsuccessful.
An earlier effort at redeveloping the site beginning in 2000 resulted in a short-lived Sam’s Club and a Walmart that closed in 2016.
“There are definitely challenges, but none of that is anything new,” said City Councilman Eric Costello, whose district includes the property, which is largely cut off from South Baltimore by the elevated Interstate 95 and railroad tracks. “This is a 25-year project. To achieve the full master plan it will take time and patience and diligence, but they’re on the right track.”
Costello said he’s pleased with the progress and commitments from three tenants in the cybersecurity realm. He also said it is a sign of the developers’ confidence that work began before the sale of city bonds.
He said the first round of bonds is now scheduled to be sold in February, a delay from past timelines.
Weller said in its statement that there has been no delay in the bond sale, but the developer was using its own funds to begin the estimated $100 million in initial infrastructure work to keep “our schedule and commitments to current and prospective tenants.”
The bonds are part of the controversial city-approved TIF, or tax increment financing, and are to be repaid through new property taxes generated by the project.
The Baltimore Development Corp., the city’s economic development agency, declined to make anyone available to discuss the project or why bonds have not been sold yet.
“TIFs are complex financing structures and there are quite a bit of legal documents that need to be prepared and finalized,” said Susan Yum, a BDC spokeswoman, in an email about the timing of a sale.
That funding will pay for public infrastructure — roads, sidewalks, parks, water and sewer lines — and not the buildings on the site, which Weller Development said in a statement remain on target. None of the funds are to be used to support Under Armour’s now delayed expansion on the site.
As described by Weller, the first five buildings are:
>A 185,000-square-foot residential building with shops and a garage.
>A 206,000-square-foot office building with retail.
>A 123,000-square-foot apartment building and hotel with retail.
>Another 270,000-square-foot apartment building with shops.
>A 200,000-square-foot office building and 72,000-square-foot market with rooftop event space and patio.
There also will be a marina and 10 acres of parks and piers.
Renderings of the buildings shown to a city design panel and shared on the project’s website depict mid-rise buildings of seven stories or so with brick facades and many windows.
The project’s likely success can’t be known, said Robert P. Stoker, a public policy professor at the University of Maryland, Baltimore County who has studied economic development initiatives.
Whether a project is successful for a company depends on many variables, from the economy to the quality of what’s built, he said.
And whether others regard it as a success boils down to what expectations the city and residents have for the project, Stoker said.
"Reasonable people can disagree about the potential risk of the project and whether the community benefits contained in the agreement are sufficient to justify that risk,” he said. “Reasonable people could also disagree about whether subsidizing Port Covington is the best way for the city to address the problems of urban distress.”
Under the community benefits agreement, the developers will send more than $100 million over time to area neighborhoods for improvement projects.
Port Covington’s success is “not a given,” and Baltimore generally needs the reinvestment the project is likely to attract, said John Lettieri, president and CEO of the Economic Innovation Group, a Washington think tank that helped create the Opportunity Zone tax policy as a means of directing investment to areas most in need.
With such a large investment by the city in Port Covington, officials should do what they can to support the project in other ways, he said.
Port Covington’s inclusion in the Opportunity Zone program was controversial because it’s not by itself a distressed area and became eligible on a technicality created by a tiny overlap between its census tract and a federal empowerment zone.
The public support, waterfront address and a big name owner could lure businesses and investors, Lettieri said. Some will come to see Port Covington and end up in other Baltimore Opportunity Zones, he added.
“But don’t take it for granted that because someone says something will happen that it will happen,” he said. “Baltimore has to make its best case. ... I hope the momentum continues.”
More than three years from the contentious debate over the massive city subsidy, resistance has softened, including from City Councilwoman Mary Pat Clarke. She had abstained from the vote approving the aid package, saying at the time it fell short in areas such as guaranteeing fair wages for workers.
She now says the city needs to support the project and its potential to house a future expansion by Under Armour.
“They’re the home team, and I’m rooting for them,” Clarke said. “Most of my concerns were based on the money that we were investing, which is basically done. Also, so many neighborhoods nearby are directly benefiting from the contribution.”
Others didn’t need convincing, such as Janke from DataTribe, which signed a lease for about 18,000 square feet for the company that invests in cyber startups. He believes the construction could be pushed ahead of schedule because of all of the interest from prospective tenants.
Janke expects many of the dozen firms the company has shepherded over the last three years will relocate to Port Covington from around Maryland and Virginia. By the time the first office building opens, he said, DataTribe will have invested in another four to eight companies that also could become tenants.
The concentration of cyber firms will lure more from Silicon Valley, he predicted, along with tech-focused banks, law firms, computer and technology schools. They will be drawn by lower costs of starting and growing a business and the local talent pool that includes defense industry workers and graduates from Maryland universities with relevant degrees.
Another tenant, AllegisCyber, a cyber-focused venture capital firm founded by DataTribe co-founder Bob Ackerman, plans to establish a second headquarters at Port Covington to complement its Silicon Valley base.
“You’ve got this concentration of technical expertise and cyber security that’s unparalleled in the world,” Ackerman said. “‘Cyberport’ Port Covington allows us to give the cyber industry a home address, a corporate address, a focal point. ... It’s an opportunity to rally the industry together around a destination.”