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Cordish Co. seeks $3 million in rent relief for Inner Harbor properties

power plant lead

The imposing Power Plant, on Pratt Street, is one of the Cordish properties beset by high vacancies.

Photo by: Mark Reutter

Power Plant and Power Plant Live, two popular Inner Harbor tourist attractions, are in financial trouble and owner David S. Cordish wants Baltimore to forfeit $3 million in annual rent payments to help bail them out.

In return for the rent reduction, Cordish pledges to invest $16 million in the properties, which are about 40 percent vacant and face “serious challenges” in attracting retail and office tenants, Cordish told the Baltimore Development Corp. (BDC) today. (The glut in office space downtown has become widespread, leading to near-record levels of office vacancies.)

The BDC went into a closed session this morning to discuss the proposal by Cordish, who personally outlined his plan before the group.

M.J. “Jay” Brodie, president of BDC, said after the closed session that the agency would send its recommendation to Mayor Stephanie Rawlings-Blake, but could not disclose it because it contained confidential business information.

Closed to Media in Mid-Session

The meeting was closed to the public – during the middle of Cordish’s presentation to the board – at the request of Kaliope Parthemos, deputy mayor for economic development. That action resulted in the ousting of two members of the press (including this correspondent).

Prior to the closed session, Cordish, chairman of The Cordish Companies, a family-owned entertainment and gaming developer, outlined the problems facing the Power Plant, a huge brick edifice on Pratt St., and Power Plant Live, a collection of bars and clubs two blocks north on Market Place.

Despite its popular bars and clubs, Power Plant Live does not have enough office tenants to make it financially viable, David Cordish told the BDC today. (Photo by Mark Reutter)

Despite its popular bars and clubs, Power Plant Live does not have enough office tenants to make it financially viable, David Cordish told the BDC today. (Photo by Mark Reutter)

Cordish said the vertical space at the Power Plant, not to speak of the four smokestacks that run through the structure, makes it difficult to attract retail and business tenants. Leases for the two major tenants – Barnes & Noble and Hard Rock Cafe – will soon be up for renewal, while a third space, occupied by ESPN Zone, was vacated last year.

An annex building to the south, also controlled by Cordish, currently has a 30 percent vacancy rate due to downsizing by business and retail tenants.

Cordish did not address media reports that Phillips Seafood Restaurant is negotiating to lease the ex-ESPN site after it ends its tenancy at Harborplace in September.

Power Plant Live, purchased from the city for $5 million and developed by the Cordish Co. between 2001 and 2003, also suffers from high office vacancy.

He said that office rents are the “bread and butter for Power Plant Live,” and that, as Class B office space, the property is difficult to rent.

“What To Do?” Developer Asks

In addition, the pricing power for rents has been eroding and current asking prices are less than they were 10 years ago.

“What to do with Power Plant Live? We have subsidized the project very heavily,” Cordish told BDC.

He added that he had never before gone to BDC – or asked the city for tax or rent abatements – but that “financially [the properties] are a tremendous struggle.”

Currently, the Cordish group rents the Power Plant facility from the city for a fee of $1,000 a year. Starting in 2009, or 11 years after Cordish took over the site, the city was entitled to 22% of the net profit from the building.

That profit amounted to $9,800, Darrell Doan, a BDC official, said today, which suggests that the entire facility generated about $40,000 in profit in 2009. The amount of earnings for 2010 has not yet been calculated, Doan said.

Here's what makes the money – the Pier V Parking Garage. Cordish wants rent abatements from the city. (Photo by Mark Reutter)

Here's what makes the money – the Pier V Parking Garage. Cordish wants $3 million in rent abatements from the city. (Photo by Mark Reutter)

More Public Investment for the Inner Harbor

The one facility operated by Cordish Co. that returns a healthy profit is the Pier V Parking Garage. It is this property that Cordish wants a rent abatement from the city, along with a reduction in the ground rent it pays for the Power Plant Annex.

In return, according to minutes from a June 15 meeting with BDC, Cordish Co. would invest appropriately $10 million to refurbish and modernize Power Plant Live and $6 million to make improvements to the Power Plant.

In addition, Cordish said his company has secured $11 million in financing from its lenders to support Power Plant Live.

Cordish his bank lenders would not assist in additional financing of the Power Plant or restructure the present loans to Cordish. One key problem is the annex building has negative returns due to high vacancy.

Zed Smith, vice president of operations for Cordish Co., told the BDC board today that not only the Power Plant projects, but the entire Inner Harbor has reached “another tipping point” in which funds must be invested in order to keep the area attractive to tourists.

“Over time, things have changed,” he said. “The retail climate has changed. Where do we go from here?”

Smith said the city is facing the need to revitalize the whole Inner Harbor, and that, he implied, would take a great deal of fresh public funding.

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  • Donna Merkle

    How much longer can Cordish expect anyone to feel sorry for him? He sunk all his money in the Arundel Mills gambling project. He has gotten an extension on the TCIII project in Towson and is now over due from its original start date. If he has the problems that he is having now, how can any city or county trust him when all his promises come due?

  • CB

    Another reason why business tax rates should go down in the city to make sure these buildings are 85-95% to capacity. It’s tough to make a buck in the city when the city has its hands deep in your pockets.

  • Eericson

    “Power Point Live?” How much does Bill Gates get for that?

    Seriously–very confusing typo, I think. Unless there really is a “power Point Live” complex in addition to Power Plant and Power Plant Live. Please clarify.

    Other than that, thank you, very much, for the scoop!

    • Anonymous

      yipes i think we have it straightened out. Thanks for the compliment – and the catch!

      • Gerald Neily

        “Power Point Live”: LOL !!!!! Very Freudian !!!!! Right on, Mark !!!!! Right now I’m looking at the city’s Pratt Street report, which previously called for a huge increase in retail space there, but then David Cordish protested vehemently that the area could not support more retail. Now the online version has been made into a Power Point-style presentation, with all specific text shorn and consisting only of captions such as “Pratt Street: Currently Bleak and Unfriendly”, followed by pretty pictures of makeovers showing more people, less traffic and less substance.

        http://www.godowntownbaltimore.com/Publications/Pratt_Street_Presentation.pdf

        So now we know of that which David Cordish speaks. And there is every reason to believe that the city’s retail ambitions for Howard Street consist of the same fantasies.

        • Marc

          I thought it was the office space at Power Plant Live that was suffering, not the ground-floor retail so much (the article cited Cordish’s claim that the class-B office space was underutilized). And he said the Power Plant’s retail space was hard to rent because of its awkward floor space (old smokestacks, verticality – retail too far above street level, etc.) that made that building difficult to rent. So it’s not necessarily an oversaturation of retail, but an oversaturation of office space (and poorly-configured retail).

          I dunno where the claims of oversaturated retail in downtown Baltimore come from. There’s an oversaturation of office space, but retail? If anything, there’s an oversaturation of retail geared to tourists and high-end shoppers, and a dearth of retail geared towards “average” downtown residents. Too many trinket shops, tee shirt boutiques, and silver spoon stands, and not enough barbershops, groceries, and greasy spoons.

          With the increase in downtown residents over the past decade, it would make sense to gear any new retail to them. Right now – save for the Superfresh that’s apparently about to close – they have to travel well out of downtown to buy the necessities for daily life. What exactly is behind this segregation of retail into “downtown = tourist traps” and “outside downtown = joe schmoe shops” districts? Uneven tax policies and strange subsidies? Complex regulations making it difficult for locals to start businesses to serve their local peers (in smaller, older buildings) and favoring instead high-end chain retailers with the necessary resources to overcome those complex, overly-strict regulations? Poor planning and zoning? I dunno what the exact causes are, but I think downtown retail will fare better if it is geared to local, middle-income residents rather than concentrating on luxury boutiques, tourist traps, and celebrity restaurants.

          • Gerald Neily

            Excellent and thoughtful comments, Marc. Reutter’s article makes it clear that it was both a retail and an office problem, but then BDC went into a secret session, so it’s just getting weirder and weirder. Transportation planning is my thing, which is weird enough.

          • Nate

            Poor planning. The City has sold its soul on tourism. It has promoted too much harbor-oriented retail while paying lip service to the core and the Westside. The problem is there is too much retail located on the edge of downtown at the harbor. Geographically, the catchment area for the shops is weighted toward the north. This why the whole Pratt St. revamp with more retail went nowhere. It couldn’t be but more of the same. Retail at the harbor is simply out of range for day-to-day shopping if you work on Lexington St.

          • http://twitter.com/markt322 Mark T

            Hear, hear. I hate having to get in my car and leave the city to shop for groceries or go to the movies (yeah, we usually go to Landmark, but with the recent spate of deals on Fandango tickets, we’re driving out to Columbia or Arundel Mills where we can actually use them). It’s not that you can’t find groceries in the city, but there’s an excessive tilt towards boutique/organic or convenience stores. My paycheck doesn’t cover both organic food and double property tax (currently paid in the form of rent, but maybe one day directly to the city).  

            When we travel to other cities, we often find ourselves walking to the local supermarket to stock up on lunches, snacks, and other necessities for our stay (not to mention a bottle of wine, another thing we can’t do here). I live within a few blocks of a good handful of hotels – but my nearest choices for groceries are the crummy Shoppers (1.5 mi) and pricey Whole Foods (1.3 mi). If Harris Teeter ever opens it will hopefully provide a good middle ground on the quality vs price question, but it still doesn’t fill the gaping hole in the center of downtown.

      • Steve

        PowerPoint Live has real possibilities though; right?  Next presentation maybe I’ll get a few actors from the Single Carrot Theatre to act out my material?

        That would liven up an otherwise deadly business meeting…

        • Anonymous

          Will it be a “closed” performance, or can we stick around?  –BB

    • Anonymous

      From Brew: Thanks for catching the typo, and apologies to B. Gates.

  • Nate

    So this seems to add to the consensus that the City has been and still is a giant money sink. They really only made $40,000 in profits in 2009? How convenient.

    The economy is rough, but look, the citizens of Baltimore can’t afford to bail out every business that comes on hard times. We’re suffering too, and we don’t get these conveniently timed breaks. Let it go vacant, I’m sorry to say. The office market will come back at some point. We need to generate jobs, and to do that we need to lower property taxes as a least a partial cure to that problem.

  • http://twitter.com/MairZdoatz Mair

    I’ve got a business. I’ve got vacancies and expenses. No one is bailing me out. My business…my problem. That’s how it’s supposed to work.

  • Baltimore Guy

    How about we clean up the harbor a little?!  That will make it more appealing to business and to the  business class

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