Thursday, May 25, 2017

A $10 billion silver bullet for Baltimore?

Once in a while a developer comes to town and presents a silver bullet to solve all of Baltimore's woes. Says its easy, "bulletproof", that the City is a "blank canvas" or simply wonders why the hell nobody in this City hasn't figured it out yet.

The latest arrival is Virginia developer Kahan Dhillon who makes the rounds selling a plan that he dubbed "The Baltimore Renaissance", a moniker that had been taken by William Don in the 1980s, but I am not sure Dhillon has researched Baltimore that far back or he wouldn't call it a "blank canvas". This isn't the first time that real estate folks who are used to "the art of the deal" think that things are simple until they find out they are not.
Kahan Dhillon, (Linked-In)

When Virginia developer David Hillman (74) with his Southern Management came to town in 1994 and renovated Charles Tower and the Gallery Towers. he was so emboldened by the success that he mused aloud about Baltimore lacking enough confidence to see its own opportunities. In short order he went to buy and rehab also the old Hechts Department store, the old Standard Oil building on St Paul Street and the old BGE headquarters on Liberty Street.
"It's capitalism. People like me are driven by greed. If there's a profit in projects like this, then people like me will do it."  (David Hillman, SUN 5/2/2000)
Today Hillman is not so bullish on Baltimore anymore, maybe rather jaded thanks to the arduous journey of the Westside where his investments sit alongside stalled projects that make life tough for him and his tenants.
Unfair: Hillman letter to Rawlings Blake, May 2012
David Murdock in 2015

One of the neighbors at the Atrium (the former Hechts building) belonged until recently to Los Angeles real estate mogul and pineapple czar (Dole) David Murdock (94) who also once was very bullish on Baltimore and left a big footprint during the Schaefer Renaissance. He was also clear about a competitor. He told Forbes in 1997:
"I won't tell lies, I’m not Donald Trump. He says he’s got a billion dollars when he’s got two dollars.”
Murdock who converted an entire Hawaii island from pineapple plantation to tourism brought Baltimore the Harbor Court Hotel (which he sold in 2006) and spent money on the Lexington Market extension spanning over Lexington Street which is now slated for demolition. His One Market Center Office building was the result of an agreement between Murdock and the City's Market Center Development Corporation which committed him to more than $100 million worth of development over a decade: construction of apartments and offices, renovation of two department stores and creation of retail shops. The Washington Post quoted the  head of the Market Center Development Corporation gushing about the 1982 deal:
No other developer was willing to take on this massive project because it runs against the flow of Baltimore's economic resurgence, which is concentrated around the Inner Harbor area. Murdock stepped in because he "saw something nobody else wanted, and he could get it cheaply, We had maybe 150 prospective developers in here, but nobody wanted to do it because they thought the area would never come back. We were beating our brains out. Murdock is a man of vision. He saw what we see."  C. William Pacy, president of the city-sponsored Market Center Development Corp.
It isn't just cynicism to recall these earlier deals that went sour, it is rather a sober reminder that a big city (not to mention a big country) ticks differently than private company billionaires think.
1992 Brochure 1992:
"The Renaissance Continues"

Back to Mr. Dhillon and his big plans as reported in a recent BBJ article, outlined on his website and told to varies people in Baltimore he considers influential enough to help him to get attention. So far he hasn't reached the Mayor yet. 
"The plan creates a spring board that will catapult Baltimore into a 'Revitalization Spring' and produce historical record setting outcomes that will be felt in the city for many generations to come," The plan, along with its comprehensive, engaging community collaboration, its carefully crafted site and developmental financial plans, and assistance with the selection of development plans and their execution, will transform Baltimore into a national and international turnaround story of monumental historic proportions." (website)
 "This plan is bulletproof" the managing partner of the Virginia based Regent Co. LLC (a four-person real estate company without a website which Dhillon founded in 2013) told the BBJ. His statement is a sign of unmitigated hubris with which we have become all too familiar alongside the total lack of detail how the plan is supposed to work.

Dillhon envisions a $10 billion redevelopment with 70 redevelopment clusters ("feeder systems") throughout all council districts that eventually are supposed to grow together to form the big picture Dillhon envisions on the "blank canvas" ignoring two centuries of history and 620,000 residents.
This is not how real development projects work. Real developments are based upon specific sites, identified opportunities, and coherent business models. This is a fishing expedition.(Brad Rogers, Placemaking consultant in a comment on FB) 
Dhillon brags on his Linked-In site that his Baltimore plan will "for the 1st time in the modern History of Baltimore City, create a Historic Comprehensive Collaborative Consensus Based Citywide Revitalization plan". Dhillon holds a bachelor's degree in business administration and in political science from the catholic Loyola Marymount University in Los Angeles.

His TBR organization says about itself: "The Baltimore Renaissance (TBR) is a Community Impact Organization committed to bringing parity to the disparity throughout the Greater Baltimore area, while advancing and enhancing the area as a whole. The Baltimore Renaissance focus areas of impact are, but not limited to, the following: Affordable/Workforce Housing, Economic Development, Education, Environment, Non-Profits, Public Policy, Public Safety, Revitalization, Transportation, and more."
"I met with the guy. He wants the city to essentially give him all of its publicly owned property and then other developers will develop it and he will take a fee. I did not believe the project to be credible although I think the gentleman means well" (Joshua Greenfeld, Vice President Government Affairs at Maryland Building Industry Association on FB) 
As I have stated many times in these columns, there is principally no reason why Baltimore shouldn't be able to capture between 10-20% of the region's growth and build the city back by filling its many vacant houses with the currently prevailing smaller households of singles or non traditional families. Much fewer residents can fill the city back up than the city lost in the last 50 years. It is also correct, that only fairly comprehensive approaches can accomplish that and that even large projects of the past were insufficiently shored up by such coordinated comprehensive strategies. But it is also blatantly obvious that a comprehensive strategy requires much more than bricks and mortar and entails more than real estate or "deal making", whether all private, public-private or fully public. Any large scale undertaking requires massive amounts of up-front capital. The Port Covington project recently demonstrated that even a well heeled and growing company cannot do this without public support. It doesn't appear that Dhillon has significant assets or income from his real estate company. Whatever he would want to start would immediately depend on others, public subsidies, tax increments, bonds or whatever resources he could garner.
Sean Closkey in Oliver (SUN photo, Kim Hairston

The Mayor is considering the creation of a reinvestment fund and agency that would pool grants, assets and resources that were previously deployed by Baltimore Housing and also by BDC.

What Baltimore needs is the strategic deployment of scarce capital in the manner which TRF has demonstrated in Oliver and in Barclay by investing "patient" capital, a strategy also used by the Philadelphia based Reinvestment Fund with an office in Baltimore. RF has helped fund the Parkway Theater and the Centre Theater renovation. TRF's investment strategy in blighted areas works from the edges to the center of an area that also needs a "backstop" in form of other investments or areas of stability (such as EBDI or the Hopkins campus). TRF's investments included rehabilitation, new construction, rental and homeownership and a mix of affordable and market rate housing. The idea of growing investements until they are seamless is essentially sound.

Baltimore seems to be, indeed, ripe for the deployment of "patient" capital. With enough resources such a strategy could be used in several areas at once and it is conceivable that the broad approach itself could create additional demand fueled by success (a virtuous cycle). The critical question regarding Dhillon's plan remains: Where do the initial investments come from? On that our man with the "bullet proof plan" has little to show so far, not even a proof of concept project, let alone a pineapple plantation or food company.

Klaus Philipsen, FAIA

An entertaining Facebook discussion trail about the Renaissance Plan can be found here

The book, Baltimore: Reinventing an Industrial Legacy City is my take on the post industrial American city and Baltimore after the unrest. 
The book is now for sale and can currently be ordered online directly from the publisher with free shipping. 














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