Forget About the Apple; Teachers Get a Break On Rent at New Baltimore Development
By Caitlin Jones & A. J. Johnson
7 min read
Tax Credit Advisor, April 2009: Are you a teacher? If so, you can get great break on your monthly rent at the new Miller’s Court development in Baltimore, MD.
Public education – and rewarding the professionals who contribute to it – is the theme of this $21.9 million historic rehabilitation project, which is utilizing new markets and historic tax credits.
“We bought the building with the intent of having a mixed-use project that allowed for 40 one-, two-, and three-bedroom units that were marketed and geared for teachers new to Baltimore,” said developer Donald Manekin, of Seawall Development Corp. “It’s been a pretty successful project, in terms of the user groups as well as the community as a whole.”
Baltimore-based Seawall, formed by Donald Manekin and his son Thibault, began work on the project in mid-2008. “We’re really finishing up the project now,” says the father. Residents and office tenants will move in early this summer.
Customized Development
In addition to the 40 apartments, the 80,000-square-foot development will include 31,000 square feet of office space and 1,000 square feet of retail space. Manekin said about half the apartments have been pre-leased, mostly to existing or incoming new Baltimore city public school teachers. All but 3,000 square feet of office space has been leased to nine different nonprofit organizations that Manekin said “are underpinning the success of the school system.”
Manekin, who noted he and his son believe in doing real estate around being socially conscious, indicated that Miller’s Court reflects their background and interest in public education in Baltimore, and a desire to address the needs of the city’s school system and educated-related nonprofits.
Manekin said Baltimore’s public school system hires hundreds of new teachers each year, many of them recruited through nonprofit groups – like Teachers for America and the Baltimore City Teaching Residency – and who move to Baltimore to start their career with no idea of where to live. In addition, Manekin said there are 25 to 30 nonprofit groups that are key to the school system’s success that are scattered at different locations, paying multiple office landlords market rents, without any economies of scale.
The premise of Miller’s Court was to develop a project that provides both affordable housing for new teachers, and reasonably priced office space for education-related nonprofits in a facility customized to meet the needs of both user groups.
Manekin said six existing teachers from Teachers for America helped design the project. He noted the development will include a fitness center for apartment and office tenants, a “mini-Kinko’s” where the resident teachers can make copies of next day’s lesson plan for students, and a coffee shop. In addition, for the office tenants, there will be a common break area/lunch room/ kitchen, plus conference and training rooms available to them as an amenity. A former loading dock between the two buildings has been converted into an outdoor sitting area with a fire pit. And parking will be provided on lots surrounding the project, some leased from railroad giant CSX.
Manekin said teachers will get a “fairly deep discount” on the rent compared to non-teacher tenants. For example, the projected initial monthly rent for a one-bedroom apartment will be $700 for teachers and $1,000 for others. For two-bedroom units, teachers will get a break of $650.
The loft-style apartments, contained within an historic brick former manufacturing plant, will feature exposed brick, high ceilings, skylights, timber joists and columns and beams, and a washer/dryer in each unit. “We’ve kept as much of the old architecture as possible,” Manekin said. “Our goal was to create an environment for those young professionals that are, in fact, making a significant difference in Baltimore.”
The project will boast numerous “green” features. Manekin said LEED Gold certification is being sought.
Historic Property
Miller’s Court is an area straddling the Remington and Charles Village neighborhoods of Baltimore, in a gritty section characterized by lots of residential row houses and warehouse and manufacturing buildings. “It’s been an area that’s been pretty devoid of any real estate investment for a long period of time,” says Manekin.
The property is rich in history and is listed on the National Register of Historic Places. The oldest building, constructed in 1874, and an addition built in 1910, were occupied from 1884 to 1953 by H.F. Miller and Sons, which manufactured tin cans. After 1953 the property evolved to multi-tenant use as warehouse and manufacturing space. From 1990 to 1992 the U.S. Census Bureau rented two floors, but since 1992 the property was vacant, eventually becoming an eyesore. “It looked pretty beaten up, broken windows, and the neighborhood was complaining to the city,” said Manekin.
Seawall secured the acquisition of the property in October 2007, after buying the note on it from local 1st Mariner Bank and foreclosing on the previous owner/developer.
Manekin said Seawall didn’t have difficulty getting approval of the historic rehab plans for the project from the National Park Service and state historic preservation office – necessary to qualify for the federal historic rehabilitation tax credit. In fact, he said the prior owner had already drawn up plans for an historic rehab project, so Seawall only had to get approval of amendments for areas of the building it planned to do differently than the prior owner. As far as window replacement goes, that was no problem – all the windows were gone. Manekin said the installed new energy-efficient windows match “pretty closely to what was there.”
The developer has had to undertake some environmental remediation work at the site, including abatement of lead paint in the building and soil contaminated by previous oil tanks. The project has received some assistance for this effort from the city’s brownsfield program.
Funding Sources
Miller’s Court is being financed by multiple tax incentives and funding sources. Tax incentives include the federal new markets tax credit (NMTC) and historic tax credit, and the Maryland state historic tax credit.
Much of the financing is being generated by the NMTC. Two community development entities (CDEs) are involved. Enterprise Community Investment, Inc. (ECI) provided a $9.4 million allocation of NMTC authority that is being channeled to the project from an equity investment made by US Bancorp Community Development Corporation, a NMTC and historic credit investor in the transaction. Additional NMTC and historic credit equity investment has been made by SunTrust CDE, which provided a second allocation of NMTC authority.
Other funding sources include loans from the city and state and a deferred developer’s fee. Manekin said the city has agreed to provide 10-year property tax relief.
Manekin said Miller’s Court is his second NMTC project, and his first with Enterprise. Joe Wesolowski, ECI Vice President for Structured Finance, said Enterprise decided to participate in the project because it felt it will have a substantial positive impact on the surrounding neighborhood. In addition, he indicated that the project’s green and sustainable features fit with Enterprise’s objective to have a “green overlay” in all of its programs and activities.
Manekin anticipated that Miller’s Court will have a “ripple” effect on the neighborhood.
Wesolowski said the project has created probably 80 to 100 construction jobs. Original projections also estimate the creation of 55 and retention of 156 permanent jobs.
The project is located in a census tract defined as “highly distressed” under the NMTC program. Traits include a poverty rate of 29%, a median family income equal to 44% of the area median family income, and a jobless rate 1.74 times the national rate.
Wesolowski said Miller’s Court, which is near Johns Hopkins University, represents a “great use” of the NMTC program, and “hopefully will be a catalyst for other development in that corridor. When you look around – at least when I was last there – you don’t see anything going on.”
Manekin suggested the project has already caused a lift, and noted Seawall is looking at some additional potential opportunities in the neighborhood. “The property owners that surround us now think that the value of their residences and businesses have increased,” he says. Plus, he continues, “the city’s paying attention to the neighborhood.”
