City gets 19 applications for federal Recovery Zone bond money 

Posted: 1:06 pm Fri, November 20, 2009
By Robbie Whelan
Daily Record Business Writer

The Baltimore Development Corp. Friday announced that interest from developers in federal Recovery Zone Facility Bonds far outstrips the available money to be offered under the stimulus program.

The city received 19 applications, totaling $185.4 million, seeking uses for the city’s $30.8 million in tax exempt bond funds authorized under the American Recovery and Reinvestment Act.

In July, Baltimore’s City Council adopted a resolution designating much of the city a Recovery Zone, making it eligible for bond funding under the stimulus program. Areas identified as part of the zone were either part of the city’s existing Empowerment Zone, Enterprise Zone or Community Development Block Grant programs, or were plagued by high rates of home foreclosure.

The purpose of the bonds, which will be administered by the BDC on behalf of the city, is to “assist in financing qualified projects which include the new construction, expansion, or substantial rehabilitation of office buildings, hotels, business parks, industrial and manufacturing facilities, retail, restaurants, certain qualifying residential projects, mixed-use projects and other types of private commercial uses,” according to a statement issued by the BDC.

The list of applicants is diverse, including one condominium project, two apartment buildings, three mixed use residential/retail projects, four hotel projects, a biotech building, a hydrofoil ferry service, a transitional housing facility, a healthcare facility, and even one large mixed-use sports and office project that has been abandoned.

“It certainly speaks to the amount of pent-up investment that’s out there,” said Jamie Kendrick, deputy director of the city’s transportation department and chair of the Baltimore Economic Recovery Team, a newly-formed task force that tracks stimulus spending. “[The projects] weren’t all central business district projects. Yeah, there’s work to be done in downtown area, but the fact that people are interested in investing in different parts of the city is positive.”

Gateway South, a project proposed by Rockville’s Cormony Development LLC in conjunction with a company led by Baltimore Ravens linebacker Ray Lewis, requested $30.8 million under the program. But the site that would have been used for that project is now reserved for a slots casino that is awaiting a gambling license from the state.

Deputy Mayor Andrew Frank said last week that the city typically does not offer bond funding in a competitive process. Rather, private developers and other businesses come to the city with a project in mind, and the decision to issue public bond funds must be approved by City Council ordinance.

The Facility Bonds program was advertised to business owners in a request for proposals process this summer because the bonds are tax exempt and come with very attractive interest rates for the borrowers, Frank said. It is just one of a number of stimulus funding initiatives available to city businesspeople.

Another, known as TIGER, is a competitive grant program meant to improve transportation and other public infrastructure. The city has authored an application for $35.5 million in TIGER funds on behalf of developer Patrick Turner’s Westport project, a $1.4 billion effort to remake the city’s Middle Branch waterfront as a second downtown.

A third stimulus program, the Recovery Zone Economic Development Bonds, could be used to replace the city’s contribution to infrastructure bond financing programs. At Westport, for example, Economic Development bonds could be used to replace part of the $160 million in tax increment financing that Turner received this year to build roads and sewage lines, and the city has committed its $21 million allocation of these bonds to funding infrastructure at Westport.

Westport, however, was not one of the bidders on the competitive bonds announced Friday. A spokeswoman for Turner said Friday that Westport was not ready for the facilities bonds.

“They did not think the facility bonds were appropriate for Westport at this time, because they don’t have a building at this time,” the spokeswoman said. “At this point, what Westport needs is infrastructure. They wouldn’t be able to use [the facilities bonds].”

Another developer, Richard Naing whose company, RWN Development, plans to convert an old grain warehouse that is being used as self-storage in downtown Baltimore into an apartment complex, said that he applied for $10 million in facilities bonds because there’s no money anywhere else.

“There are certainly not any commercial loans available. The equity players we used to deal with, the Bear Stearns, the Lehman Brothers of the world, are out of business,” Naing said. “Don’t believe them when they say they’re lending. For every new loan they put on the books, they have to take out more capital, because they have to cover loan-loss reserves. … Everything that’s getting done has FHA, Fannie Mae, Freddie Mac backing.”

Kimberly Clark, executive vice president of the BDC, said that the agency’s board pared the list of 19 applicants to “less than half” of that at a meeting Thursday. She also explained that the bond funds were offered through an RFP process because they are to be used to finance private development projects.

“These are tax-exempt bonds, and that’s the draw. Usually tax-exempt bonds have to be used for some public project,” she said. “This was a totally unique situation, as far as it being for private development. We knew there would be a lot of interest.”

PROJECTS SEEKING FACILITY BOND FUNDING

• Westside Lofts at 311 West Baltimore Street (Urban Ex Development), seeking $3.4 million

• 701 East Baltimore Street (The Cordish Company), seeking an unspecified amount

• 1201-1207 North Charles Street (Struever Bros. Eccles and Rouse), seeking $1.6 million

• Chesapeake Residential Re-Entry Center (Volunteers of America Chesapeake), seeking $6 million

• Curtis Bay Energy & Healthcare Service Center (Himmelrich Associates Inc.), seeking $14 million

EBDI Eastside Parking Garage (Forest City), seeking $19.2 million

• Flour House Apartments (RWN Development Group, LLC), seeking $10 million

• Gateway South (Cormony Development), seeking $30.8 million

• Hollander 95 Business Park (Hollander Rock LLC), seeking $3.5 million

• Hotel Monaco by Kimpton (ARC Wheeler), seeking $15.6 million

• Hydrofoil Passenger Ferry Plant (Maritime Applied Physics Corporation), seeking $10 million

• Inn at Penn Station (Hospitality Partners, LLC; A&R Development Inc.; James M. Jost & Company; Summit Associates, LLC), seeking $8.1 million

• Marketplace at Fells Point (South Broadway Properties LLC; Hybrid Development), seeking $8 million

1. McHenry Row (Chesapeake Paperboard Centre, LLC; Mark Sapperstein), seeking $5 million

• New Town Development Corp., seeking an unspecified amount

• Poppleton Redevelopment Project (Poppleton I LLC; LaCite Development), seeking $10 million

• Sheraton Four Points Hotel (All Star Hotels, LLC), seeking $5 million

• Sonesta Hotel (Redwood Capital Advisors), seeking $18.3 million

• UMB BioPark, Building Three (Wexford Science & Technology, LLC; Ken Banks), seeking $30.8 million