Monday, February 4, 2019

What is going on with Port Covington?

There were days when Marylanders could imagine Kevin Plank next to Steve Jobs, Mark Zuckerberg or Elon Musk. At least those who root for strong leaders and believe that economic development is tied to big business. Plank managed to grow his company in a nearly exponential way for twenty years and create a brand loyalty matching that for Apple, at least locally. In various articles on this blog it was discussed if Plank was a Baltimore Medici (Do Cities Need Sugar Daddies?) or if he could even solve the affordable housing crisis.
Local brand pride: "Protect this House" (Photo: Philipsen)

The winds have changed and with it the opinions about those heroes of innovation, disruption and refreshed capitalism. "Pride comes before the fall" is a German proverb that I grew up with and heard many times. A puritan Calvinistic dogma of not getting too uppity, because after the rise would, inevitably, come the fall. But isn't the American risk taking can-do attitude a lot more attractive than Old World admonitions not to stick your head up too far?

Still, all the heroes of the innovation industry now have egg in the face, from Zuckerberg to Musk, and, of course, also Plank.  Gone are the days of spending money on anything along the way, from horse racing to whiskey distilleries, from fish houses to luxury hotels, and from a maker space to water taxis, and a 30,000 sqft home in Baltimore County. Not to mention a new corporate headquarters surrounded by a $5 billion new town designed to make Nike look old. The  LinkedIn page of the CEO of Plank Industries, Tom Geddes, still exudes that optimism:
Plank at the height of his reputation
Plank Industries is a privately-held investment company with diversified holdings that include commercial real estate, hospitality, food and beverage, venture capital and thoroughbred horse racing. The company is based in Baltimore, MD, and serves as the family office of Kevin A. Plank, the founder, Chairman, and CEO of Under Armour, Inc. Key investment holdings include Sagamore Spirit and a major equity stake in the Port Covington redevelopment in South Baltimore. 
Geddes still sounded giddy in 2017 when Curbed quoted him as saying: 
“We haven’t done this in a transactional way; we consider this development fundamentally important to the city. What the team has put together is so significant, by the time it’s done, it won’t be thought of as the Under Armour project in the same way it’s thought of today.” Tom Geddes
Plank contrite: Responding to shareholders (SUN photo)
But later the same year Plank  told the Wall Street Journal."2017 sucked".
To assure his shareholders he had to tone it down and emphasize that his focus is on the company and not his private investments.

Now in 2019 it has become much quieter around the transformative Port Covington development; the "we build it together" commercials have long disappeared from the airwaves. It has become also quiet around the brand and its leader who in earlier days had issued inspirational pamphlets such as the Under Armour "bible" ("Protect This House - The Under Armour Code of Conduct") and had inspirational slogans printed on any available office wall.  Gone are the interviews with media from around the world.
The four pillars of greatness:
Make Great Product. Tell a Great Story. Provide Great Service. Build a Great Team. (UA Code of Conduct booklet)
At times of adversity, some of the hype and hyperbole which American media like to spin around corporate heroes can turn into assaults on their character in the way of the WIRED article about Elon Musk this month titled "Dr Elon and Mr. Hyde".
Under Armour auditorium in former
Sam's Club (Photo: Philipsen)

Proverbs and the media turn-around would be entertaining enough, were it not for the fact that communities and employees depend on the success of the disruptive companies and their celebrity leaders. The City of Baltimore hitched its wagon firmly behind the Plank horse. How much so is illustrated by the numerous events for which the Mayor and the City Council had appeared at Sagamore Development. It was also exemplified by the City doubling down on Port Covington for the failed bid for Amazon HQ2.

Port Covington was presumably the ready made bed into which Amazon could simply drop and rake in the entitlements and the big tax increment financing (TIF) benefitsWisdom on the street is that Amazon didn't select Port Covington and Baltimore because of crime, poor schools and insufficient public transport. But the reason was likely much simpler. Amazon's Bezos never wanted to rescue a struggling city, never intended to be economic development and always wanted to go where everybody else would also go. Without the glamour factor Kevin Plank brought to Port Covington while his brand was shiny, the spot looks rather sad.

In Smalltimore it is very difficult to get hard facts. Many real estate deals happen on a level of high secrecy which even the Baltimore Development Corporation BDC or well connected commercial real estate players can't quite penetrate. Which pieces of real estate are "on the market" and why? Is the Westport land sold or are Plank Industries looking for a $50 million equity partner? Who has signed leases for what in phase 1? Those who know don't want to reveal anything about the big players, especially not Under Armour and Goldman Sachs, the saviors that were supposed to lift this city out of its pessimism and inferiority complexes. Even if now under headwinds, they can still hurt you if you don't toe the line.

Who builds Port Covington? (WYPR photo)
In spite of that,  a few facts are well known:
  • No bonds have been issued for any part of Port Covington even though we are far beyond the construction begin anticipated in the TIF application (phase 1 in 2017).
  • Instead of expansion and a new campus UA is in the news for layoffs and contraction.
  • The private 35,000 sf Plank mansion to be constructed in Greenspring Valley has been put on hold
  • No new grant application was filed for the planned light rail extension into Port Covington.
  • Plank Industries which had invested in the Foundery maker space, taken a financial stake, and brought it into its own City Garage let the organisation "run out of runway before it was airborne" (Foundery CEO Jason Hardebeck to Baltimore Fishbowl)
  • The voice of Port Covington is no longer Kevin Plank or Tom Geddes but Marc Weller
The much touted community benefits agreement for the surrounding six communities called SB7 (Port Covington counts itself as one of the communities making it seven) would be a good bellwether. If the Port Covington project would be in trouble, the communities would likely feel the effects. The chair of the SB7 board, Michael Middleton who is also the executive director of the Cherry Hill CDC told me that the communities wondered about the future themselves. Inquiring about it,  they were told last year that whatever difficulties Under Armour may have, that there will be no effect on the community benefits agreement. Middleton says that so far "they have lived up to the agreement". He cited as examples the $50,000 grants that were dispersed to each community in two chunks in 2017 and 2018, the completion of a SB7 Strategic Plan and the ongoing technical assistance they keep getting including trips to a Purpose-Built Communities conference in Atlanta paid by Weller Development and the subsequent designation of Cherry Hill as a Purpose Built community two weeks ago.

Early this year, Weller Development is expected to fund a "Lego room" for early childhood support in the completed 21st century ES/Middle school in Cherry Hill. "Trust is so important", Hamilton says, explaining how Weller Development contact Alicia Wilson, Senior Vice President of Impact Investments, continues to play a key role in this trust. (She was just featured in Forbes). He continued "we [the six communities] have come together, we are now working together on all aspects of community life...this would never have happened without Port Covington".
That big investors, on which the City had pinned a lot of hope, fall on hard times is nothing new in Baltimore. Nor is it new that the details of the fall receive much less media attention than the rise. There was little specific info to be had when Bill Struever fell from his local hero status in the Great Recession when his, until then successfully expanding development and construction company Struever Brothers, Eccles and Rouse, went under. Or when developer Pat Turner fell from the lofty heights that brought Baltimore the first million dollar plus penthouse in Silo Point and later Baltimore's first big Middle Branch dream: Westport, envisioned as a new waterfront development with 2,000 residences, a 65-story skyscraper, offices, a stadium, a beach, a kayak launch area and running paths. Then, in a blink it was gone in foreclosure. (Plank Industries picked the cleared land up shortly thereafter). Struever and Turner have been staging a come-back lately, proof that scrutiny during the downfall can be risky, especially when fate of the City is so woven into their business. But no developer had ever been engaged in a community benefits agreement of the size of Sagamore's SB7.
Port Covington history as a coal transfer yard 

Little information is percolating outside the nearly impenetrable information management of  Sagamore/Weller Development: The Foundery closing its location in City Garage and planning to move back to Fells Point could be an indicator for bigger change at City Garage, but it is hard to verify this.

Is the fact that no tranche of the $600 million plus TIF has been bonded a sign that Weller's phase 1 development in Port Covington announced last fall is in trouble or further delayed?

In September 2018 Weller staged a media event showing renderings (here). This was followed  by a coup on October 18, when Weller announced a new twist for Port Covington: "Cyber Town USA". The Mayor and the Governor showed up when Weller Development revealed to have"nabbed" three tenants for a first phase of development on the mostly barren Port Covington lands:
Fulton-based cyber incubator DataTribe and Silicon Valley-born cyber investment firm AllegisCyber have both committed to moving to the South Baltimore project as it begins to take shape. They hope to help establish Baltimore as a global destination for technology and cybersecurity companies — "Cyber Town USA." (BBJ)
Under Armour headquarters rendering (2016 Screenshot)
The move came just in time to quell doubts that anything at all would happen on the massive land holdings of Plank Industries. Since then it has been quiet, too quiet. The fact that no money has been drawn to build roads and utilities nurtures doubts again. How firm are those commitments to lease in the Rye Street Market project? The project covers only a fraction of the overall area, but is still quite big: A mixed use complex with loft-style offices adding up to 162,000 square feet, plus a 13,000-square-foot outdoor market and food hall and 50,000 square feet of retail/restaurant space, plus a fitness center, all nestling around the already existing Sagamore waterfront distillery.  The time for build-out was given as late 2020 or early 2021. It seemed not impossible, even without UA as a direct player. Marc Weller can still work with the Goldman Sachs funds of $233 million said to be available for Port Covington.

For the project to become reality in the promised time-frame, design and construction on infrastructure would have to start very soon. Some of the proposed "Chapter One" development uses existing streets,could it mean that no TIF money would be needed? Is a groundbreaking imminent as soon as the ground thaws?
Rendering of phase 1 development "Chapter One" (website)
Goldman Sachs' investment promise came in 2017 when being in the orbit of Under Armour was still guaranteeing some pixie dust. The same isn't necessarily true today. So the October announcement pivoted away from Under Armour and its future headquarter to cyber security as the new driver. Each speaker at the announcement offered more hyperbole than the other:
“This will be the corporate headquarters of cyber innovation in the United States,” Bob Ackerman, AllegisCyber founder).
“The impact they will have cannot be overstated, some of these highly respected businesses are leaving Silicon Valley, which is thought to be the nation’s tech capital, in order to become part of something new and exciting. … With these companies on board, Port Covington is on course to become the first-of-its-kind cyber ecosystem.” Marc Weller, president and founding partner of Weller Development, as quoted in the SUN)
“Maryland has the largest cybersecurity employee population in the United States. We have the oil, the cyber-oil.” Mike Janke, co-founder of DataTribe
“Today, we are setting the tone for the great future of Port Covington, more innovative, pioneering companies for Baltimore, which will help to further establish Maryland as a national leader in technology and as the cyber capital of America.” (Governor Hogan)
The Foundery in UA garb at City Garage 
As usual, the proposed development was cast as nothing less than a "national model".

The 2018 idea of turning Port Covington into a world cyber hub is reminiscent of Bill Struever's turn of the century dreams of a "Digital Harbor" for which Tide Point was supposed to be the North Star. There is a lot of irony in how reality unfolded:

The bubble burst and Struever's Tide Point, of course, eventually became Under Armour headquarters. The shift from digital to apparel is still a great Baltimore success story and an example of a good use for an old factory, but it certainly wasn't planned that way.  What could be next?

With UA's lay-offs and contractions, the sprawling former Proctor and Gamble campus seems no longer as crammed. A much bigger new headquarters at Port Covington seems off the table for the foreseeable future. In other words, the question is, can the new town of Port Covington succeed without its flagship, Under Armour, as the trail blazer?  Can anybody market 13 million square feet of office, residential, retail and maker space with 40 acres of public parks on the waterfront without UA's new campus as the magnet? Especially in a time when it is more than likely that the red hot real estate market will contract? Can "cyber" once again be an engine that yields unforeseen results?
$5billion, 13 million square feet: Is there any need? 

This question should give Baltimore leaders sleepless nights, even though, so far, little public money has left City coffers for Port Covington. "The City is protective of it’s money – no bonds have been issued and the project will be well scrutinized", Kimberly Clark, Executive Vice President at BDC told me upon request. As it stands, nobody likes to scratch the already fading dream of the big economic engine named Port Covington. City leeaders believe in the professional integrity of development team and that the latest cyber dream is based on hard commitments.
Slogans at Under Armour's Sams Club
building (phto: Philipsen)

Nay-sayers and pessimists are numerous in Baltimore. Not everyone has bought into the notion that Port Covington could save Baltimore or even the surrounding communities. Not even after the record community benefits agreement had been signed. Cynics have poked fun of the Port Covington plans all along, never believing that Baltimore could pull off such a thing. Many people who lived most of their lives here love their city, but also harbor a deeply rooted skepticism around what is possible in Baltimore. The continued sub-par performance of Baltimore compared to most peer cities seems to prove them right.

There was something very inspiring about the fact that with Kevin Plank (and before him Bill Struever Pat Turner and others who didn't grow up here) there was someone who trusted the capacity of Baltimore and its people so much, that hundreds of millions of investment seemed fine. It was inspiring to see plans that were ambitious and stretched the envelope, using the best available practices and accommodating the common good with trails, open spaces, parks and even a new transit line. But except for a few bike paths and waterfront trails, the distillery and City Garage, all remains just an aspiration to date. Even if the cyber companies will actually come, how can the promised high standards of design and development be assured?

The notion that exceptional things can be done in Baltimore should persist. But deep down everyone knows, what this city really needs, is less physical and must focus on people instead. Investments of all kinds are needed als in in communities further away from the water. Better health, more security, better education, more equity, more access.

The SB 7 agreement ties physical and human development together. Cities are not zero sum games and a growing tax base is especially needed in Baltimore. Glitz and investment in communities is not necessarily mutually exclusive. That is why the communities surrounding Port Covington still hope for success.

Klaus Philipsen, FAIA
the article has been updated and corrected in various places

Westport sells for $6 million (Baltimore SUN Jan 28, 2015)
Kevin Plank's Sagamore amasses more land, this time in Westport (Baltimore SUN, July 10, 2015)

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