As part of an effort to increase the number of rental units and residents downtown, Mayor Stephanie Rawlings-Blake and the Board of Estimates today approved a tax write-off to a developer promising to convert an empty bank building into high-end apartments.
An agreement was signed with Baybridge Property Group to redevelop 114 East Lexington Street, located opposite the Clarence M. Mitchell Jr. Courthouse, into 102 apartments with ground-level retail.
The Beaux-Arts mid-rise, featuring intricate masonry work and oversized vault doors, originally housed the Federal Reserve Bank’s Baltimore branch. The building has stood mostly vacant since 2008 when M&T Bank moved employees out of the building after it acquired Provident Savings Bank.
Headed by Gaithersburg developer Brett Griffith, Baybridge would receive an 80% reduction in property taxes for 10 years after completing the apartment conversion. There would be a 50% abatement between years 11 and 15, with declining reductions through year 20.
The agreement – likely to cut $3 million to $4 million in taxes over the life of the contract – comes as part of the city’s residential conversion PILOT program, which gives tax abatements to developers who convert vacant or underutilized commercial properties to rental housing.
The Griffith group will still be required to pay taxes on the “base value” of the 11-story building and land. Today’s agreement sets that base value at $4.65 million, or $150,000 less than the current assessment of $4.8 million.
These tax costs, however, are expected to be offset by historic tax credits available to the developer as well as “EZ” (Enterprise Zone) state tax credits. Griffith estimates the overall project to cost $19 million.
Apartment conversions have the strong backing of the Downtown Partnership and other business groups, who have expressed concern about the high vacancy rate in the historic downtown near City Hall and the Mitchell Courthouse.
Empty space is most prevalent in older office buildings that haven’t been upgraded with Internet services and open-space floor plans.
The local attorney representing Baybridge in today’s agreement was Mark P. Keener, a partner at Gallagher, Evelius & Jones.
Keener was cited in The Brew yesterday for his involvement in the selection of Brenda McKenzie, the newly named president of the Baltimore Development Corp. The BDC advises the mayor on downtown development and approved the PILOT abatement for Baybridge.
As a matter of policy, the BDC does not disclose the expected dollar tax savings from PILOT agreements, saying such disclosures could reveal commercial secrets and inhibit transactions with developers.
As a result, the mayor and spending board today approved the Baybridge contract based on a schedule of abatement percentages without any hard numbers as to the anticipated tax loss to the city.
The BDC and Mayor Rawlings-Blake have argued that the cost of PILOT tax abatements is more than matched by the personal income taxes paid by renters and the increased economic activity generated by new residents downtown.