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“Superblock” project gains traction, while value of downtown parcel declines

City faced with selling the property at a sharp discount from its 2007 value.

mccrorys-building

The former McCrory’s five-and-dime store is part of the Superblock parcel.

Photo by: Elizabeth Suman

Stalled for more than a decade, the Westside “Superblock” project appears on the verge of coming to life.

Confident that a lawsuit against the project will be turned aside by the Maryland Court of Appeals, city officials are preparing to sell the property to Lexington Square Partners.

Last month, the Baltimore Development Corp. (BDC) recommended that Mayor Stephanie Rawlings-Blake approve a tax break to subsidize the proposed $150 million retail and apartment complex bounded by Fayette, Howard and Lexington streets and Park Avenue.

The agency went into closed session to approve the PILOT (payment in lieu of taxes), whose amount has not been disclosed. Under a PILOT, a developer pays as little as 5% of the assessed value of improved property for a period of 10 to 20 years.

Steep Drop in Value

Meanwhile, time has taken its toll on the vacant city-owned properties that was once at the heart of Baltimore’s thriving Howard Street retail district.

Back in 2007, when the Baltimore Board of Estimates agreed to sell the parcel to Lexington Square Partners, the property was valued at $21.6 million.

Today, the site is appraised at $12.2 million, according to M.J. “Jay” Brodie, president of the BDC. As a result, the city is renegotiating the original pact to reflect the 43% drop in price.

At the same time, the city is expending $1.2 million to demolish the ex-Greyhound bus terminal on Fayette St., and $349,000 to stabilize the roof of the ex-Read’s Drug Store at Howard and Lexington.

Brodie said these costs would be factored into BDC’s negotiations with the New York and Atlanta development group.

Deductions for Remediation

Brodie also pointed out that the original agreement allowed the developer to deduct up to $10 million for demolition and remediation expenses.

If the site were to require extensive environmental remediation, Brodie said in an interview today, the developer is entitled to a major reduction in the $12.2 million appraised value.

That could potentially cut the sales price of the land to a few million dollars.

Artist's rendition of Lexington and Howard streets upon completion of the "Superblock" project. (Courtesy of Dawson Co.)

Artist’s rendition of Lexington and Howard streets upon completion of the “Superblock” project. (Courtesy of Dawson Co.)

Current Timetable

Lexington Square Partners has until April 30 to reach an agreement with the city.

The developer proposes to build 296 market-rate apartments over a parking garage on the site of the demolished Greyhound terminal.

More than 200,000 square feet of retail space would wrap around the apartment high-rise, mostly fronting on Howard and Lexington streets.

Some of the retail space would be located in renovated historic buildings, including the ex-Read’s Drug Store, whose Art Deco facade would be retained.

The developer proposes to lease 53% of the space to a “national retail anchor,” Brodie said today.

He said leases with the anchor store and other retailers have not been signed.

Legal Hiccup

The biggest obstacle facing the project, according to Brodie, is the lawsuit from 120 West Fayette Street L.L.L.P., an entity controlled by Orioles owner Peter G. Angelos, now before the Maryland Court of Appeals.

The city joined forces with Lexington Square Partners and Maryland Historical Trust (MHT) to block the suit, which claims that MHT violated a 2001 pact that protected the historic buildings on the site when its executive director approved the developer’s plans in late 2010.

The suit, dismissed by lower courts, was argued before the state’s highest court in early January. A decision is expected in April – and the city anticipates getting a green light to proceed with the development.

Enterprise Zone Tax Break

In addition to the proposed PILOT, Superblock is located in a state Enterprise Zone, which entitles the developer to a 50% reduction in property taxes for five years, with 10% incremental increases for the next five years. (The state partially reimburses Baltimore for the loss in tax revenues).

Brodie said demolition of the Greyhound station will begin next month, and stabilization of the Read’s roof is scheduled to start in May.

Lexington Square Partners is headed by the Goldman, Chera, Feil and Nakash families of New York.

The first three groups are active in Manhattan and Brooklyn real estate, while the Nakash family owns Jordache, the clothes company. They are joined by Dawson Co., a black-owned development firm in Atlanta.

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  • Baltimoreplaces

    It seems like this project has also been scaled back over time.  Not so “super” anymore.

  • http://twitter.com/bosconet p johnson

    OK so why not lease the property rather than sell it? 

  • Gerald Neily

    Fern and Mark are usually headline Shakespeares, but not here. “Traction” means a force firmly supported by the ground. A precipitous drop in the ground’s value is exactly the opposite. Projects like this are supposed to create confidence for further development, but the plummeting property value indicates the market has no confidence. This project simply indicates the city’s increasing desperation.

  • Westside Resident

    Wait!! Property values fell from 2007 to 2012?!? Color me surprised. Perhaps the city can go back to Mr. Angelos’ company and ask them to make up the difference. 

  • http://baltimorerealestatesales.com/ Sellbaltimore

    I have alway been of the opinion that jobs and industry are what Baltimore City needs to carry it forward. Redevelopment will bring more options to residents and visitors and hopfully revitalize the area.

  • roger

    This project is doomed to fail. Who is going to patronize these stores and live in these apartments? Having to give so many incentives to develop simply tells me the whole thing is risky. As much as I would like to see it be successfull I don’t see how it can be.

  • Tom Kiefaber

     It’s unbelievably short-sighted idiocy for government to be serving the developer’s needs, and not serving our citizen’s rights by acting in their best interests.  
    We must learn from the tragic razing of The Royal Theatre, and not permit these shortsighted, costly BDC blunders to permit the irreplaceable historic fabric of Baltimore to be destroyed and hauled away, fueled by an antiquated racist gentrification development policy.  The *bulldozer madness* isn’t only dismal, misguided BDC and City Hall leadership and developer hype and spin; it’s criminal negligence to be stopped in its tracks. 

    Read’s (1934) and the diverse, historically unique Superblock must be saved. As a predominately African American city, we must “Protect the Irreplaceable” from the shortsighted, scorched-earth barbarism of Baltimore’s aged, urban renewal-minded establishment.

    William Donald Shaefer realized this and warned the citizens and our leaders from his first-hand point of view in the 2001 short documentary, “Baltimore’s Westside Story”, “don’t get hooked up with the bulldozer people, that’s a dead end.” 
     
    http://vimeo.com/9022133

    • John A

      Read’s is certainly a very important landmark in Baltimore’s history and should be memorialized in some way. That said, I don’t see how the new development could possibly harm the site anymore than it already has been. If anything it would only promote the site’s importance. Anyone walking or driving by the building in its current condition will just view it as any other decaying building. However the new development will hopefully revitalize the area bringing the site more attention then its gotten in decades. With the plan to preserve the facade of Read’s it very well could become publicly recognized as the historical landmark it is.

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