Maryland’s Most Desired Piece of Real Estate—Baltimore’s Harbor Point

Baltimores Harbor PointUnless you are looking for it, you will certainly miss the largest piece of undeveloped real estate in Baltimore’s Inner Harbor. Some call it the most desired piece of real estate in Maryland. With a price tag of around $1.8 billion, the Harbor Point project, if and when it gets developed, is not going to be cheap.

Once developed, Harbor Point is going to have a hotel, high-rise residential towers, office space and a Morgan Stanley facility. The project is understood to be a “once-in-a-generation” opportunity by Mayor Stephanie Rawlings-Blake.

JPMorgan Chase & Co is set to invest $67 million (for a 90% stake) in a 23-story skyscraper on the site, which is slated to be the mid-Atlantic headquarters of Exelon Corp. Michael S. Beatty’s Harbor Point Development Group LLC, the main developer of Harbor Point project, is also receiving $178 million in loans from M&T Bank, according to city officials.

All cities lure high-end development with tax deals, subsidies and various other “sweetheart” deals. And in this case, Baltimore is no different. But there are a few reasons why this 27-acre piece of real estate tucked in between Fells Point and Harbor East is so controversial. First there is the environmental factor.  The property is the former site of the Allied Signal chromium plant which closed in 1985.  The operations of that plant resulted in one of Maryland’s largest environmental cleanup projects. The redevelopment of the site presents significant challenges for the developer because they need to work around strict environmental rules and acquire advanced EPA approval for their plan.  But it appears that at the beginning of last month (Dec. 2013) the EPA has approved the development plans.

Second is the use of taxpayer money to help develop the site. Though the specific sources and dynamics of financing the project seem to require updates each month, this month Baltimore’s Board of Estimates finally approved $107 million in taxpayer assistance. This will come in the form of tax increment financing bonds (TIF). This $107 million in TIF bonds is part of a larger $400 million in public subsidies for the project, subsidies which include around $110 million in tax breaks.

The city issued the TIF bonds to pay for new roads, parks and utilities.  Future property taxes associated with the development are expected to pay off the bonds. In addition to increased tax revenue, Baltimoreans will soon be able to reap the social and cultural benefits of a new park, hotels, shops, and an increasingly user-friendly waterfront promenade.

Submitted by Stephen Bishop, CPA

KatzAbosch is a leader in the Real Estate industry.  To contact a KatzAbosch tax advisor, please call 410-828-CPAS (2727) or email sbishop@katzabosch.com

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