A downtown building not built

Shown is the site of the old Allied Chemical plant, between Harbor East and Fells Point, which will be the site of the new Exelon headquarters.

For a city whose last Fortune 500 company was about to be acquired by an out-of-town corporation, there was not just consolation but actual excitement over one of the deal sweeteners: Chicago-based Exelon Corp. promised to build a new downtown office building for the merged company, the first such construction in Baltimore's central business district since 2004.

The competition was spirited among a handful of developers: They produced architectural renderings of shiny towers and lined up contractors and financing packages. One had a request en route to the mayor proposing a tax break to make his Inner Harbor parcel even more attractive. Meetings, presentations and behind-the-scenes lobbying ensued to land the prize.


But last week, in an earlier-than-expected announcement, Exelon dashed the hopes of many when it announced the winning bid: a waterfront parcel in the Harbor East area, which in recent years has steadily drawn businesses away from the traditional downtown core. Once again, the score was bakery magnate and Harbor East developer John Paterakis Sr.-1, downtown-0.

M.J. "Jay" Brodie, president of the Baltimore Development Corp., was among those caught off-guard when Exelon, which is in the process of a $7.9 billion acquisition of Constellation Energy, announced its decision. The company had said that it would not reveal where it would build in Baltimore until after the deal was completed, and it still needs the approval of the Maryland's Public Service Commission, which meets later this month.


"I was very surprised," said Brodie, longtime head of the city's quasi-public economic development arm. "I wouldn't have guessed the outcome either."

And there were those who were dismayed that Exelon rejected downtown, with its ample office vacancies and empty lots, and headed east to an area that is fast becoming a glitzier alternative to the historic central business district, with firms such as Legg Mason and Morgan Stanley setting up shop there.

Now, those who advocate for downtown say the city needs to reconsider the tax breaks that have favored new developments like Harbor East at the expense of the aging parts of downtown. Despite the upscale nature of the boutique- and restaurant-filled Harbor East, for example, the area remains in an enterprise zone that reduces property taxes for new buildings.

"The challenge is there are many commercial properties paying the highest property taxes, and they are in the older parts of town and they're losing tenants to the newer parts," said J. Kirby Fowler, president of the Downtown Partnership, a nonprofit that looks out for business and residents in the city's central core. "We need to step back and consider how incentives are doled out, and how we can be proactive and find ways to help older buildings in the core."

That the Harbor East area, and Harbor Point specifically, have become so attractive represents a remarkable transformation — and one cheered even by those who would have preferred Exelon to build downtown.

For more than a century, beginning in 1845, what is now the 27-acre Harbor Point was the site of a chrome factory that leached toxic industrial chemicals into the ground and harbor. It took a decade and more than $100 million worth of remediation to contain the cancer-causing chromium within a slurry wall and beneath layers of impenetrable material at the former AlliedSignal plant until the Environmental Protection Agency deemed it safe for redevelopment in 1999.

But for all its environmental damage, the site has long been viewed as perhaps the last, best undeveloped real estate on the harbor, with sweeping water and skyline views.

"Let's be honest: It's a very good development site," said J. Joseph Clarke, of J.J. Clarke Enterprises, whose own bid to build a downtown tower for Exelon lost out to Harbor Point. "It's surrounded on three sides by water. That's a big win for the city. We should all be glad [Exelon] found a home there."


Still, Clarke, who proposed a 25-story office building on the site of the old Southern Hotel at 1 Light St., said he thought his bid hewed closely to what Exelon had requested, particularly since the corporation asked for energy efficiency and other green measures — fittingly, given that the new building will house the company's renewable energy division.

"We were the only site with our own subway stop," Clarke said. "We have 11 bus lines. We thought that was a strong suit."

There was no shortage of downtown suitors, with prime spots such as the former McCormick & Co. site at Light and Conway and the old News American parcel, at 300 E. Pratt, being used as surface parking lots while awaiting development.

Brodie thought the McCormick site in particular was a development waiting to happen.

When Stephen Gorn, president and chief executive of Questar Properties, bought the site of the former spice company plant, Brodie said he wrote him a note saying he had just bought the best unbuilt site downtown and inviting him to a chat whenever he decided what to do with it.

That eventually led to Brodie bringing Gorn's request for a tax subsidy for his proposal — an office building for Exelon, apartments, retail and parking — before the Baltimore Development Corp.'s board. Brodie said the board agreed to recommend to Mayor Stephanie Rawlings-Blake that she approve an incentive.


But before she could act on the BDC recommendation, Exelon made public its decision to go with Harbor Point.

Rawlings-Blake spokesman Ryan O'Doherty said he didn't know whether the mayor had even seen Gorn's request before the Exelon announcement, but said that she believed Harbor East could grow without harming downtown.

"She did make clear to Exelon she would like to see more private investment in the central business district," O'Doherty said. "But ultimately, it probably would be inappropriate for the mayor to direct a private corporation to one parcel over another."

While Brodie says the BDC doesn't play favorites, it's clear he believes building downtown has its advantages — much of the infrastructure, from roads to utilities, is already in place, while Harbor Point is accessible only by a single road, Caroline Street, he said.

"It's a world-class site without world-class access," Brodie said.

Additionally, building atop what he calls "a big bathtub" — referring to the contained contamination — poses its own set of problems. "It's certainly physically possible," Brodie said, "but it comes at a high price."


The site continues to be monitored by the Environmental Protection Agency and the Maryland Department of the Environment, both of which would review any development plans.

"On the one hand, it seems simple enough to develop an engineering plan," said Jim Carroll, manager of the state agency's land restoration program. "But the devil is in the details."

Carroll said the developer would have to submit plans showing that any work, such as driving pilings into the ground, would be done without allowing the contaminated soil or groundwater to escape the containment area.

Like others, Russell Fish, the Philadelphia-based EPA project manager who oversees Harbor Point, said he learned of the proposed Exelon building only through news reports. Fish said that, depending on the complexity of the development, it would take a month or two to review the plans for approval, although none had been submitted as of Friday.

"We try to facilitate redevelopment — clearly we recognize all the good that comes from that — provided it's done in a safe way," Fish said.

The EPA reviewed and approved the building of the Thames Street Wharf building that houses Morgan Stanley at Harbor Point. The building is off to the side and not atop the area where the former chrome factory was located and where the highest level of contamination occurred, he said.


Over the years, the site has housed temporary attractions, such as the Cirque du Soleil and weekend festivals, which also had to be reviewed by the EPA.

Exelon spokeswoman Judith Rader said the company is not concerned about the contamination because the site has been remediated.

Rader said the company speeded up its original timetable of selecting and announcing a developer and site so that the company would be able to move into the new building by 2014. She defended the decision to locate at Harbor Point rather than downtown, saying the site "best met the key criteria," including the kind of space the company needed, a waterfront location and Harbor East Development's proven experience in developing high-rise buildings on schedule.

Paterakis, who turned a family bakery, H&S, into a supplier to such giants as McDonald's, bought land in what is now Harbor East more than two decades ago at the encouragement of Mayor William Donald Schaefer. Then it was largely filled with lumberyards and warehouses; but, slowly, and with the help of significant tax incentives from the city, Paterakis' Harbor East Development built the neighborhood up into one of hotels, apartments, restaurants, shops and, increasingly, office buildings.

While Exelon did not "specifically" consider the tax advantages of locating on Harbor Point, Rader said, the company did look at the total cost, which would include property taxes.

"As with any investment decision, Exelon is being economically prudent in evaluating its real estate options," she said. "That means considering the overall cost of occupancy for each property, including base rent, operating expenses and property taxes."


Little is known publicly of the Harbor Point proposal, although Rader said architectural renderings and other details would be forthcoming. Michael S. Beatty, president of Harbor East Development, did not return a call for comment.

At this point, with Exelon having committed to the already bustling Harbor East area, some are taking the tactic, If you can't beat 'em, join 'em. Brodie said that by one definition, downtown extends from a one-mile radius of the Pratt and Light intersection which, perhaps as the crow flies, could encompass Harbor Point.

"We don't have a definition for downtown. Or rather, it clearly is not the definition of 20 years ago," Brodie said. "It clearly has changed over time. It's not static."