Power Plant and Power Plant Live, two popular Inner Harbor tourist attractions, are in financial trouble and owner David S. Cordish wants Baltimore to forfeit $3 million in annual rent payments to help bail them out.
In return for the rent reduction, Cordish pledges to invest $16 million in the properties, which are about 40 percent vacant and face “serious challenges” in attracting retail and office tenants, Cordish told the Baltimore Development Corp. (BDC) today. (The glut in office space downtown has become widespread, leading to near-record levels of office vacancies.)
The BDC went into a closed session this morning to discuss the proposal by Cordish, who personally outlined his plan before the group.
M.J. “Jay” Brodie, president of BDC, said after the closed session that the agency would send its recommendation to Mayor Stephanie Rawlings-Blake, but could not disclose it because it contained confidential business information.
Closed to Media in Mid-Session
The meeting was closed to the public – during the middle of Cordish’s presentation to the board – at the request of Kaliope Parthemos, deputy mayor for economic development. That action resulted in the ousting of two members of the press (including this correspondent).
Prior to the closed session, Cordish, chairman of The Cordish Companies, a family-owned entertainment and gaming developer, outlined the problems facing the Power Plant, a huge brick edifice on Pratt St., and Power Plant Live, a collection of bars and clubs two blocks north on Market Place.
Cordish said the vertical space at the Power Plant, not to speak of the four smokestacks that run through the structure, makes it difficult to attract retail and business tenants. Leases for the two major tenants – Barnes & Noble and Hard Rock Cafe – will soon be up for renewal, while a third space, occupied by ESPN Zone, was vacated last year.
An annex building to the south, also controlled by Cordish, currently has a 30 percent vacancy rate due to downsizing by business and retail tenants.
Cordish did not address media reports that Phillips Seafood Restaurant is negotiating to lease the ex-ESPN site after it ends its tenancy at Harborplace in September.
Power Plant Live, purchased from the city for $5 million and developed by the Cordish Co. between 2001 and 2003, also suffers from high office vacancy.
He said that office rents are the “bread and butter for Power Plant Live,” and that, as Class B office space, the property is difficult to rent.
“What To Do?” Developer Asks
In addition, the pricing power for rents has been eroding and current asking prices are less than they were 10 years ago.
“What to do with Power Plant Live? We have subsidized the project very heavily,” Cordish told BDC.
He added that he had never before gone to BDC – or asked the city for tax or rent abatements – but that “financially [the properties] are a tremendous struggle.”
Currently, the Cordish group rents the Power Plant facility from the city for a fee of $1,000 a year. Starting in 2009, or 11 years after Cordish took over the site, the city was entitled to 22% of the net profit from the building.
That profit amounted to $9,800, Darrell Doan, a BDC official, said today, which suggests that the entire facility generated about $40,000 in profit in 2009. The amount of earnings for 2010 has not yet been calculated, Doan said.
More Public Investment for the Inner Harbor
The one facility operated by Cordish Co. that returns a healthy profit is the Pier V Parking Garage. It is this property that Cordish wants a rent abatement from the city, along with a reduction in the ground rent it pays for the Power Plant Annex.
In return, according to minutes from a June 15 meeting with BDC, Cordish Co. would invest appropriately $10 million to refurbish and modernize Power Plant Live and $6 million to make improvements to the Power Plant.
In addition, Cordish said his company has secured $11 million in financing from its lenders to support Power Plant Live.
Cordish his bank lenders would not assist in additional financing of the Power Plant or restructure the present loans to Cordish. One key problem is the annex building has negative returns due to high vacancy.
Zed Smith, vice president of operations for Cordish Co., told the BDC board today that not only the Power Plant projects, but the entire Inner Harbor has reached “another tipping point” in which funds must be invested in order to keep the area attractive to tourists.
“Over time, things have changed,” he said. “The retail climate has changed. Where do we go from here?”
Smith said the city is facing the need to revitalize the whole Inner Harbor, and that, he implied, would take a great deal of fresh public funding.