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Finding opportunities in Baltimore

Joe Nathan Big

Ben Seigel has had a busy 2019. Just a little over one year into his position as Baltimore City’s opportunity zone coordinator, he has been tracking down potential investors to deploy funds into one or more of the city’s 42 designated opportunity zones.

Seigel previously had been heading the 21st Century Cities Initiative at Johns Hopkins University, designed to bring together civic leaders, Johns Hopkins researchers, and other universities directing their talents toward the vital interests of cities. He was tapped for his current role in response to the section of the 2017 Tax Cuts and Jobs Act creating opportunity zones across the country.

The selling point for the opportunity zones provision in the tax law was its focus on targeting investment into distressed areas, places not typically on the radar for those with discretionary investment dollars. Investments of capital gains, from the sale of real estate or other assets, in the designated locations receive preferential tax treatment in order to spur investment in distressed communities throughout the country.

Interviewed at the office of the Baltimore Development Corporation, Seigel described his role as serving as a catalyst for this place-based initiative and lining up the business or development opportunities for the investment funds being set up in response to the TCJA provisions.

Much of the focus across the country has been on the real estate development opportunities that present themselves. But the capital gains can also be invested in a fund that, in turn, is investing in an operating business.

Baltimore may lay claim to one of the earliest examples of the use of an opportunity fund in connection with an operating business. An investment vehicle organized by College Park, Maryland-based Verte Opportunity Fund contacted Galen Robotics, then located in Silicon Valley. The medical robotics company, making use of patented technologies used in micro-surgeries developed  by Johns Hopkins professors, saw value in being located closer to the engineers and research scientists at Hopkins.

Speaking by phone with Verte founder, Dr. Leonard Mills, I learned that, even as the regulations for investing in an operating business are still being finalized, Galen has moved its operations with 15 to 20 employees to 1100 Wicomico St., an old industrial loft building a few blocks west of M&T Bank Stadium in Pigtown.

Galen’s President and CEO Bruce Lichorowic and his chief scientific officer have personally made the move from Silicon Valley to Baltimore. With the infusion of new funds, the company has plans to add 80-100 engineering staff over the next year and to sell its technology to major research hospitals and medical facilities.

 

Promising projects

The city is pursuing a wide range of “investment-ready” real estate developments as well, using the incentives offered in the opportunity zone legislation. Seigel highlighted some projects that he indicated are moving ahead.

One project set to come out of the ground in 2020 is the Yard 56 redevelopment of the blighted 20-acre former home of Pemco International Corp., a manufacturer of porcelain products. Located in southeast Baltimore on the south side of Eastern Avenue opposite Bayview Medical Campus, the mixed-use development, with retail and office space and later phase residential and hotel uses, is reported to have secured an eight-figure investment from an opportunity fund.

Seigel said that the developer of Yard 56, P. David Bramble, managing partner of MCB Real Estate, is ready to move ahead with two other projects in the city. One is the long-languishing Madison Park North project in the Reservoir Hill neighborhood, now scheduled for construction of several hundred residential units and an innovation center for artists and entrepreneurs.

The second project will involve the complete redevelopment of the Northwood Plaza Shopping Center, providing for new shops and restaurants, along with a Barnes and Noble bookstore serving Morgan State University.

Other projects, such as the redevelopment of the Royal Theater and adjoining properties to help revive the historic Pennsylvania Avenue entertainment district, now being championed by Jimmy Hamlin, proprietor of the Avenue Bakery, are in the early conceptual stage.

There has been much skepticism regarding the opportunity zone program around the country, with examples cited of investments going into locations that can hardly be characterized as distressed. Also, unlike other federal programs offering tax incentives such as the Low Income Housing Tax Credit or the New Markets Tax Credit programs, there are no reporting or accountability requirements. Members of Congress, from both parties, have been working to remedy these deficiencies and improve transparency.

Seigel would welcome that increased transparency for the program and has participated in discussions in Washington to bring about that result. And, if a few more of his “investmen ready” projects come to fruition, Seigel said that 2020 will be a much busier year.

Joe Nathanson is the not-quite-retired principal of Urban Information Associates, a Baltimore-based economic and community development consulting firm. Since 2001, he has written a monthly column for The Daily Record and can be contacted at urbaninfo@comcast.net.

 

 

 

 

 

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