Daily Record Business Writer//March 15, 2016
//Daily Record Business Writer
//March 15, 2016
The developer of a 44-story mixed-use luxury apartment tower in Baltimore said the project wouldn’t be possible without a tax credit the city passed in 2014.
Steve Gorn, president and CEO of Questar Properties, during a groundbreaking event for the 414 Light St. project, praised the 10-year tax credit for market-rate units for making the development happen. The 394-unit high-rise building is expected to cost more than $160 million to complete.
“It was a game-changing factor, and I would say order of magnitude over $2 million a year,” Gorn said.
He was joined in praising the tax credit by Kirby Fowler, president of the Downtown Partnership of Baltimore, who called it a model development incentive.
“It’s a model, it’s transparent, it’s citywide and the way incentives should be done,” Fowler said.
The tax credit for the construction of market-rate apartments provides an 80 percent break on incremental real property tax increases for the first five years. After that the credit is drawn down until it reaches 30 percent in the final year.
The credit, which was proposed by Mayor Stephanie Rawlings-Blake’s administration, is available to any development in the city that creates at least 20 market-rate apartments with a minimum investment of $60,000 a unit.
In recent years some developers, politicians and economists have been critical of how the city uses development incentives. They argue an overhaul of Baltimore’s property taxes, which are about twice as high as the next highest jurisdiction, would do more to spur development in the city.
Gorn expects those renting apartments to represent a “very diverse demographic.”
The apartments will range in size from studio apartments as small as 510 square feet to units that will be larger than 1,800 square feet. Rents will range from $1,750 to more than $8,000 a month. There will be no affordable housing units in the building.
“It’ll be millennials, people just out of school … all the way up to empty nesters like me and everything in between, so very diverse,” Gorn said.
The building will feature more than 40,000 square feet of indoor and outdoor amenity space. Premium amenities will include a rooftop resort-style pool, urban park with gardens and a chef-inspired demonstration kitchen.
Additionally, 414 Light St. will feature more than 12,000 square feet of ground-floor retail, although it’s unclear what will go into that space.
“We have not determined exactly who it will be yet, but there will be several different types, it could be a Trader Joe’s, but we’re certain we’re going to have at least one, maybe more, white-tablecloth restaurants,” Gorn said.
The property, which received city design approval in 2014, was initially supposed to break ground last summer.
Gorn attributed the delayed start of construction to the complicated nature of the project. He also denied there were issues in lining up financing for the development. Last month Citizens Bank provided a $107.28 million construction loan for the project.
“It was really just a matter of coordinating all the elements, the design, the cost, the bid process, the lenders working together with us, it all came together very well,” Gorn said.
He also brushed off concerns about Baltimore’s apartment market. Some experts have warned the market may have become oversaturated by a surge in supply in the last few years. Gorn argued that there’s a lack of ultra-luxury apartments currently available in the Baltimore market.
“There’s an urban renaissance going on in downtown Baltimore, and when you see more high-quality product coming on the market it feeds off itself, and there’s really nothing like our building,” he said.
Questar Properties has a long history with the property, which was formerly home to spice maker McCormick & Company and is now a surface parking lot.
In the 1980s McCormick sold the property to the Rouse Co., which sold the property in 2002. Questar bid on the 1.9 acre lot at that time but fell short.
When that buyer, an affiliate of ARC Wheeler Equities, defaulted on a series of loans Questar bought the note on the property and purchased it at auction in 2011 for $11.5 million.F