After all the fanfare and political pressure last year to get $660 million worth of tax incentives approved by a lame-duck City Council, the Port Covington project is far behind schedule and is not expected to break ground until 2018.
Kevin Plank’s private real estate arm, Sagamore Development Co., is searching for equity partners, informed sources tell The Brew, and has not submitted any financial data to the city that could start the process of approving TIF (tax increment financing) bonds.
A spokeswoman for William H. Cole, president of the Baltimore Development Corp. (BDC), confirmed that “currently there is no timetable for the bond issuance.” Another city official, who asked for anonymity, added that the project’s start date has been “pushed out nine months to a year.”
Phase 1 of the proposed mega-project, dubbed “New Port Covington,” was scheduled to start next month, according to the Tax Increment Financing Application submitted by Sagamore last year.
Under that timetable, the Board of Finance, headed by Mayor Catherine Pugh, would now be approving the first $62 million tranche of TIF bonds.
But the bond issuance has not been on the board’s agenda, and Deputy Finance Director Steve Kraus confirmed that Sagamore has not submitted the financial data necessary to proceed. “Once we get real numbers on the first phase, we can act,” he said.
“We Can’t Wait”
Today’s situation is a far cry from a year ago when Sagamore and its charismatic owner insisted that Baltimore would lose an opportunity of a lifetime if the City Council did not act promptly on the company’s request for tax subsidies six times greater than those at Harbor Point, the previous TIF high water mark.
“We literally can’t wait,” Plank said in a full-page ad in The Baltimore Sun on the eve of the City Council’s September vote approving the $660 million tax deal.
Sagamore’s president, Marc D. Weller, said that ground breaking could start as early as the first quarter of 2017 if TIF funding were approved, while Tom Geddes, CEO of Plank Industries, publicly threatened: “If this project is not shovel-ready and underway, it is going to be very very difficult for Under Armour to keep many of those jobs growing here in Baltimore.”
Critics, including a broad coalition of fair housing, faith and community groups, said the deal should be delayed until a new mayor and City Council took over in December.
But they were brushed aside as obstructionists by City Council President Bernard C. “Jack” Young and then-Mayor Stephanie Rawlings-Blake.
Weller: “On Time and on Schedule”
Asked to respond to the absence of major construction at the site, Weller denied there have been any delays.
“The construction schedule for Port Covington remains on time and on schedule, and we are actively proceeding with private equity financing for the first phase,” he said in a written statement to The Brew that sidestepped responses to specific questions about the project’s status.
But Weller’s statement did acknowledge that only small-scale projects are scheduled for 2017.
For example, he said, Sagamore plans to reconfigure existing parking spaces at the Baltimore Sun printing plant (slated to be removed under the master plan) and activate nearby grassy fields for recreational use. Sagamore is also finishing a 1.4-mile bike lane and has submitted site subdivision plans to the Department of Planning.
What is “New Port Covington”?
• One of the biggest proposed development projects in the U.S., estimated to cost $5.5 billion and take over 25 years to build.
• Located on 200 acres of former railroad yards and industrial property between I-95 and Cromwell Street, north of the new Under Armour headquarters planned along the Middle Branch.
• Envisioned as a “city within a city” that, when completed around 2045, would contain 50 new city blocks, a half dozen parks and promenades, 5.3 million square feet of apartments and condominiums, 4.2 million square feet of office space, 1.3 million square feet of rental space, 3.4 million square feet of parking, and would house about 10,000-15,000 new residents.
According to Sagamore’s Tax Increment Financing Application, a 500-page document submitted to the city last May, the first tranche of TIF bonds for the project would be issued by June 15, 2017 and would be used for groundbreaking at the eastern end of the project around Cromwell Street.
TIF bonds would be used to finance three major infrastructure projects – a new waterfront park, a plaza around a proposed hydrothermal (heated) lake, and the partial demolition and restoration an abandoned railroad pier.
Sagamore believed these infrastructure improvements would attract private investment for an office building, about 1,000 residential units and 350,000 square feet of retail space.
But Sagamore has not yet found the investors or capital to make these plans happen, sources tell The Brew.
In June 2018, the company planned to tap into a much larger tranche of TIF bonds totaling $208 million.
This money would help finance 50 new city blocks that would form the backbone of Plank’s vision of high-rise office and apartment buildings mixed with parks, entertainment zones, “innovation” zones, light manufacturing, a fixed-rail circulator streetcar system and upscale “shopping experiences.”
Where’s the Private Capital?
A city official, who did not wish to be identified because of the sensitive nature of the matter, said Sagamore has not submitted a development plan that would turn the largely fallow industrial property that Plank owns into assets valuable enough to pay interest on the TIF bonds.
“All the private financing needs to be lined up before bonds will be issued,” the official said. “We’re not going to jump out there and issue bonds without these commitments being ready to go.”
In its application last year, Sagamore said it would contribute $328 million in equity (or less than half of the city’s outlay of TIF bonds) and would seek $3.5 billion in “other private sources of funds.”
The city’s financial consultant, MuniCap, estimated that private investors would have to pay more than $290 million in TIF bond interest before the project would turn a profit.
BDC’s Cole, a booster of Sagamore’s TIF application last year, said in a written statement that Sagamore is currently “in the process of updating their development plan and overall schedule.”
He referred all other financial questions to the developer.
Weller cited the opening of the Sagamore Spirits Distillery, at 301 East Cromwell Street, as an example of “the progress we have already made with the first phase of the development.”
The distillery, however, was planned several years ago and was under construction months before the New Port Covington plan was hatched.
Likewise, City Garage, an “innovation space” that Plank opened last year with considerable fanfare, was developed prior to the master plan.
Under-performing Under Armour
Another uncertainty is the status of Under Armour’s global campus, which is the only major tenant committed so far to Port Covington.
Still in its infant stages, with elaborate plans for world-class architecture and amenities, the campus is expected to be financed by the sportswear company.
It is not part of the TIF-funded district that covers Plank’s private real estate holdings, but its construction is critical to Port Covington’s overall success.
A year ago, Under Armour was Wall Street’s darling, with a seemingly unstoppable record of growth. Since then, the company has suffered a series of blows, including a poor Christmas selling season and the lingering effects of the bankruptcy and liquidation of Sports Authority, one of the biggest buyers of its sportswear.
UA has halved its forecast for growth for 2017 and last month reported its first quarterly operating loss as a public company.
Combined with a stock price that sagged after Plank praised President Donald Trump as “a real asset to the country,” both Under Armour and its CEO have experienced a humbling jolt to its famous “swagger,” as Bloomberg News recently put it.
(NOTE: UAA stock reached a high of $43.59 on July 25, 2016, a low of $18.98 on March 23, 2017, and was trading at $21 today.)
What impact this slower growth will have on the campus – and on future employment there – is up in the air.
In its TIF application, Sagamore said that the campus would build out to 3.9 million square feet and hold 10,000 more employees than its current headquarters at Locust Point.
Sagamore is now downsizing those projections.
New construction at the campus, a source told The Brew, will be based “on the actual pace of the company’s growth” – and not on the 20%-plus-a-year expansion that Plank, Weller and Geddes had counted on when they pushed and prodded and promised the world to the City Council a year ago.
Q & A with Marc Weller
The Brew asked Sagamore’s president the following questions:
We are trying to clear up rumors that Sagamore’s Port Covington plans have been delayed and/or are even in limbo, especially with Under Armour’s recent financial setbacks.
1). Is that correct? If not, what is the current status the project?
2). Will Sagamore be going to the city anytime soon for the first tranche of TIF bonds?
3). Has Sagamore gotten the $500 million in equity investment for Phase 1 that you told the Baltimore Business Journal you were seeking last December?
4). When does Sagamore hope to complete its development plan, including its financing sources, for the city?
5). When do you expect construction of Phase 1 to begin?
6). Can you sum up what people should expect happening at Port Covington over the next six months to a year?
The construction schedule for Port Covington remains on time and on schedule, and we are actively proceeding with private equity financing for the first phase. We are proud of the progress we have already made with the first phase of the development. The Sagamore Spirit Distillery has welcomed thousands of guests since opening on April 21; City Garage currently houses 16 tenants and continues to grow; we’re constructing a bike path of roughly 1.4 miles through Port Covington; and a local non-profit, Potential Me, has moved its operation into donated space at our property at 240 W. Dickman Street.
We’ve also partnered with the Center for Urban Families to launch the Port Covington Manufacturing Bootcamp, a pilot workforce development program, aiming to cultivate and train Baltimore’s local workforce for the opportunities coming to Port Covington.
In addition, we expect to install an interim park later this year, providing waterfront access between the Sagamore Spirit Distillery and the shoreline. We also are already underway with reconfiguring existing uses of spaces throughout Port Covington. For example, we are proceeding with a modification of the Baltimore Sun’s parking facilities, adding on-street and off-street parking for visitors. We are also exploring activation of the grass fields surrounding the Baltimore Sun facility for recreational use.
We are also proceeding on schedule with all the necessary regulatory approvals with the City. In just a few weeks, the first Port Covington subdivision will be at the Baltimore City Planning Commission for approval, and we are excited to move into the next implementation phase of the adopted Master Plan.