The national economy is at its lowest tide in recent years, but the largest Baltimore City projects have remained afloat through aggressive public-private partnerships involving major local developers.
“This is a really ambitious area with some good developers. You?ve got [The] Cordish [Co.], Pat Turner, Struever [Bros. Eccles & Rouse] ? there?s a gazillion guys with the money to get through this,” said Mark Sapperstein, developer of the CityScape project in the city?s central district. “That helps. You?re in an area with a lot of experienced developers.”
Those developers face a market where fuel and material costs have skyrocketed in recent months, and financial institutions, reeling from losses connected to the tumbling residential real estate market, have tightened up their lending.
Tougher financing requirements have led to developers putting more of their own money into projects, Sapperstein said.
“Whereas in the past you might have needed to give 15 percent, now you?re giving maybe 30 percent,” he said. “And of course, the riskier the project, the more equity they?ll want. It?s easier for them to say no.”
Projects connected to health care or educational institutions, or those with city backing, such as the New East Side project, a broad-based private-public partnership, have progressed more smoothly.
“Despite a difficult U.S. economy, Baltimore City continues to experience economic development progress on many fronts,” Baltimore Development Corporation President M.J. “Jay” Brodie wrote in a letter published last week in the organization?s spring report.
Brodie highlighted the opening of new housing on the Westside of downtown, expansion of the Tide Point complex in Locust Point, and ongoing construction for the new Legg Mason headquarters in Harbor East.
But developers and other commercial real estate experts were bearish on the area?s prospects in a recent report issued by Johns Hopkins University?s Edward St. John Real Estate Department. Of more than 120 industry experts responding, just 25 percent believed development activity in the region would increase in the next year or two, while 29 percent said it would remain steady and 46 percent thought it would decline.
Also, 54 percent of respondents said public funding or incentives for real estate projects would decrease in the next one to two years, while 26 percent said it would stay the same and 20 percent said it would increase, according to the report.
Without major backing, traditional developers have had trouble getting their projects off the ground. RWN Development recently announced plans to delay the start of a mixed-use center on Guilford Avenue.
“I think if you have a specific use and a user already committed, those projects will definitely move forward,” said John Ginnever, RWN executive vice president. “That?s what lenders are looking for. When you?re building on spec, like we are, financing is a lot harder to get.”
