With $650M financing, Port Covington developers say they can move forward

A new $650 million financing closed for the Port Covington development project, and construction has restart on a site that includes a planned innovation hub and lab space in South Baltimore.

Construction on the 1.1 million-square-foot development that will bring the first phase of buildings to the site. Work had originally kicked off in May 2019, but was stopped earlier this year for safety reasons due to the pandemic by the group of firms that make up the Port Covington Development Team. It started back up just before the closing of the financing last week.

This phase of “vertical construction” is slated to result in five buildings, which will mix office, residential, retail and market space. The development team indicated buildings are expected to be completed in 2022.

With vertical construction kicked off, it’s a milestone in the efforts to lease space in the new buildings, as well. Since 2018, leaders have talked about Port Covington as an innovation hub for companies from startups to bigger firms. Since then, life sciences developer Alexandria Real Estate Equities has also started marketing a 170,000-square-foot laboratory building for Port Covington, indicating plans to bring Maryland’s other core innovation strength area of life sciences into the fold and add lab space in a city where it is frequently at a premium.

“Port Covington is receiving significant excitement from businesses and organizations of various sizes and industries, including venture capital, technology, education, cybersecurity, and the life sciences,” said Scooter Monroe, vice president and head of office leasing for Weller Development Company, which is the lead developer on the project. “Port Covington provides quality office spaces in an inspiring, easily accessible waterfront neighborhood, with an ecosystem that fosters growth and allows companies to attract talent.”

The financing deal includes $137 million in Tax Increment Financing (TIF) bonds, which were approved by Baltimore city officials in June and sold last month. It’s part of the publicly backed infrastructure funding for the project. In all, the city agreed to a $535 million TIF for years-long construction at the 235 acre site in a controversial 2016 vote.

Under this arrangement, bonds were sold by the Maryland Economic Development Corp. to fund improvements at the site like roads, sidewalks and parks. Baltimore Business Journal first reported on details of the initial Port Covington package.

Under a TIF deal, the money is essentially borrowed to pay for what the project needs now, and the bonds are repaid with tax money generated by the site. Ultimately, the city has responsibility to repay. Port Covington isn’t the only project to use the economic development financing instrument in Baltimore — the University of Maryland BioPark has pursued a TIF, for instance — but it is the largest.

“The TIF bond sale was met with overwhelming demand, and the overall deal successfully closed last week, which is significant proof of institutional investors’ belief in the future success of the project,” said Kevin Plank, the Under Armour founder and lead investor in the project who initially the bought the land. “We are thrilled about this important milestone, and what it means in validating our vision.”

Around the time of the TIF agreement, the Port Covington Development Team also signed a community benefits agreement with surrounding South Baltimore neighborhood leaders, called the SB7. With this financing, more than $9 million was distributed to the coalition. In all, Port Covington has promised $100 million in community investment for the city.

“This is an example of collaboration between the developer, city government and residents that will create thousands of jobs for local residents, invest in the surrounding neighborhoods and generate economic impact across the city,”  Mayor Brandon M. Scott said in a statement. “I’m committed to ensuring the Port Covington project is a benefit for the local South Baltimore community and speaks to how we can do business in an equitable, inclusive and accountable way.”

The Port Covington project initially surfaced in 2015, after Plank amassed parcels of the former industrial land. An entrepreneurial and manufacturing innovation hub at City Garage soon opened, and Under Armour converted a former Sam’s Club for a chunk of employees. The largest piece was initially advertised as a new Under Armour campus headquarters, which has since been stalled as the company struggled in sales, but remains part of the long-term plans. Officials also pitched the site for Amazon HQ2 in 2017, but did not make the cut.

That year, storied New York investment bank Goldman Sachs became a joint owner on the project after making a $233 million investment through its Urban Investment Group.

An initial leasing phase was announced under the moniker of Cyber Town USA in 2018, and three firms committed to space: cyber startup foundry DataTribe, venture firm Allegis Cyber and corporate advisory firm Evergreen Advisors signed on to take space in one of the buildings where construction is now set to restart.

The development team has also opened Impact Village, which provides space free space for nonprofits serving the city. Baltimore accelerator Conscious Venture Lab said it would move to the space last year. Other operations at Port Covington include the Sagamore Spirit distillery, which is also owned by Plank’s companies, and the Baltimore Sun headquarters.