Goldman Sachs plans to invest $233 million to join Under Armour CEO Kevin Plank’s development firm in remaking Port Covington, becoming a joint owner of hundreds of acres along the Patapsco River slated to become a $5.5 billion mix of offices, housing, shops and restaurants.
The global investment banking company will join Plank’s Sagamore Development Co. in a joint venture that will own and develop a 235-acre waterfront parcel south of Interstate 95, Sagamore announced Wednesday. The site is next to 50 acres on which Baltimore-based Under Armour is building a new world headquarters.
Sagamore has secured $660 million in public financing for the project — the largest of its kind in city history — and has begun work to transform the once-industrial peninsula. The developers had said they were working to attract an equity investor to accelerate plans.
Marc Weller, co-founder and president of Sagamore, will continue to lead the team planning and carrying out the development, the partners said. Goldman Sachs does not have offices in Baltimore.
“As their joint venture equity partner, we will be involved only with major decisions,” Goldman Sachs spokesman Andrew Williams said. The “Sagamore team is the developer and will manage all aspects of the project.”
City officials and independent analysts said they view the new investment as a significant step in pushing the project forward and casting Baltimore in a favorable light.
“It’s a major coup to have a bank as strong as Goldman Sachs investing in Baltimore,” said Karyl Leggio, a professor of finance at Loyola University Maryland. “It’s an affirmation for the work being done to revitalize Baltimore.”
Goldman Sachs represents the “gold standard” of investment bank involvement in deals, she said. And helping to revitalize the city could have more than financial benefits for the bank — it could pay off in positive community relations and the possibility of new clients, especially among millennials who tend to value companies that emphasize corporate social responsibility.
William Cole IV, president of the Baltimore Development Corp., said the partnership with Goldman Sachs “is a very good sign that the project is getting ready to gear up.”
“This is obviously a huge commitment by a national investor following in a line of a couple of pretty big investments in Baltimore from national investors,” he said. “It’s an indication that people are taking a long, hard look at Baltimore.”
CBRE Global Investors bought a 56 percent stake in the Legg Mason tower in Harbor East in March in a deal that valued the property at nearly $300 million. Two years ago, a group affiliated with J.P. Morgan Investment Management Inc. in New York paid $121.5 million for the Union Wharf apartments in Fells Point.
Baltimore Mayor Catherine Pugh called the Goldman Sachs investment “significant progress” for the Port Covington project and for the city’s economic development efforts.
“I don’t know if you can imagine my excitement with this $233 million in Port Covington right at the time when we’re trying to attract Amazon and other major companies to Baltimore,” Pugh said.
Gov. Larry Hogan spoke to Goldman Sachs CEO Lloyd Blankfein Wednesday about the city’s growth potential and the opportunity Port Covington represents for the state and outside investors, a spokesman for the governor said.
“Dynamic projects like Port Covington have the ability to attract this kind of game-changing private investment,” Hogan said in a statement.
Goldman Sachs said its financial commitment is the largest single private equity investment its urban investment group has made. The group has invested more than $5 billion since 2001 in underserved communities in New York, Detroit, New Orleans, Newark, N.J., Camden, N.J., Memphis, Tenn., and other cities. Goldman Sachs and Bloomberg Philanthropies recently made a $10 million commitment to 10,000 Small Businesses in Baltimore.
Tom Geddes, CEO of Plank Industries, said Plank Industries and Goldman Sachs share a common vision for urban economic growth, job creation and local workforce development in the city. Geddes said Sagamore hired a third-party broker to find a partner and was attracted by Goldman Sachs’ community-based “impact investing” around the country.
“This … today represents a major step forward in the Port Covington development,” he said.
Margaret Anadu, managing director of Goldman Sachs’ urban investment group, said the firm views Port Covington as a chance to invest and make a positive impact on the community.
“Our investment vehicle is not solely about financial returns,” she said. “We saw an opportunity to invest in infrastructure and lay the foundation for millions of square feet and dozens of buildings … but benefit Baltimore residents and … set a model around the country for what urban investment can look like to connect people and create jobs.”
Sagamore and Goldman Sachs plan to start work on infrastructure in 12 to 18 months, most of it streets, parks and utilities to prepare for future residential and commercial development.
The community benefits agreements that Sagamore negotiated with city officials and neighborhoods near Port Covington will remain in place under the joint venture. The agreements cover local hiring, workforce development, supplier diversity, affordable housing and funding for education programs, college scholarships, recreation facilities and summer jobs for youth.
Michael Middleton,chairman of the South Baltimore Seven — the group of local neighborhoods around the project — applauded the new investment. The Cherry Hill man said developers have stayed in contact with residents in the group’s communities of Brooklyn, Cherry Hill, Curtis Bay, Lakeland, Mt. Winans, Westport and Port Covington.
“Their genuine commitment to the future of our communities is above and beyond anything I’ve ever seen from a development team,” Middleton said.
The joint venture will not include the parcel south of Cromwell street owned by Under Armour, where the brand has converted a former Sam’s Club store into “Building 37” offices for more than 500 employees. The Sagamore-Goldman team will not redevelop parcels occupied by Nick’s Fish House, Sagamore Spirit Distillery, Rye Street Tavern and City Garage, home of an Under Armour design and manufacturing center, a co-working space and a maker space.
The City Council approved public financing for Port Covington last September after months of controversy. Supporters spoke of the potential job creation and the value of retaining the $4.8 billion Under Armour. Critics called it corporate welfare. Former Mayor Stephanie Rawlings-Blake signed legislation authorizing five rounds of bond issues over the next 40 years. Sagamore expects to make a request for a bond issue by the third quarter of next year.
Cole said the investment will have implications for Baltimore beyond the project itself, which city officials view as key to generating jobs and retaining Under Armour as it grows. The project, including the Under Armour campus, could grow to 18 million square feet over more than two decades.
The land includes The Baltimore Sun’s printing plant, which was sold to Sagamore in 2014 by Chicago-based Tribune Media. Tribune Media spun off its newspapers, including The Sun, earlier that year but kept their properties. The Sun has a long-term lease on the building.
Cole said Goldman Sachs’ investment “speaks volumes for what everyone sees as the tremendous potential at Port Covington.”
“When you take a look at the overall plans for Port Covington that Sagamore has put together, including their community outreach and stated goals of making sure there are ample opportunities for Baltimore residents to be employed, I think that’s very attractive to investors,” he said.