Baltimore’s Hip New Address: Mixed-Income Development Created from Renovation of Police Station and New Construction

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Fells Point Station, a new mixed-income, mixed-use real estate project in Baltimore, Md., is a story of history, firsts, and a homecoming of sorts.

The $13.6 million tax credit development, completed in December 2013, has 47 apartments and 3,000 square feet of commercial space, created from the renovation and adaptive re-use of an historic former police station and the construction of a new addition that wraps around the original building.

Located blocks from the waterfront at the intersection of East Bank Street and South Broadway, the project is the first in Baltimore by the joint venture developers, Dan Henson and Mission First Housing Group (Mission First). For Henson, President of The Henson Development Company, Inc., the project is a return to his roots and caps a years-long effort to redevelop the site.

“This is the first project I’ve done in Baltimore in 20 years,” says Henson, who grew up locally in public housing and was a developer before and after a stint in 1993-1999 as the city’s housing commissioner. “So even though I live in Baltimore and my company is headquartered in Baltimore, we hadn’t really done anything in Baltimore since I was commissioner.”

Henson and Mission First, a nonprofit affordable housing organization with offices in Philadelphia and Washington, D.C., previously co-developed several housing projects in the District of Columbia.

Combination of Old and New         

Developed on the site of the vacant former police station and an adjacent surface parking lot, the four-story Fells Point Station incorporates the renovated 16,000-square-foot existing building and the 37,000-square-foot addition, joined together by a glass structure that serves as the lobby entrance.

The original red brick and masonry building, constructed in the 1800s, was listed by Henson in 2011 on the National Register of Historic Places.

Fells Point Station includes 47 one- and two-bedroom apartments, ground-floor retail space, an exercise room, a multi-purpose room, free Wi-Fi for residents, an elevated courtyard, and a green roof above 33 enclosed parking spaces. The development, managed by Columbus Property Management, a member of Mission First, is the first new housing built in the neighborhood in more than 50 years.

The Fell’s Point Neighborhood is one of Baltimore’s oldest and was a major seaport and shipbuilding center in the 1700s and 1800s.

Once gritty in character, the area is now quite trendy, with lots of restaurants and shops mixed amongst pricy restored historic houses and upscale apartments. Fell’s Point has had some notable residents, among them Frederick Douglass, the African-American statesman, writer, and social reformer, and Michael Phelps, the Olympic gold medalist swimmer.

Multiple Funding Sources

“We had multiple layers of funding in this transaction,” explains Mission First Managing Director Sarah Constant.

The site was purchased from the city and the deal closed in October 2012. Funding sources included equity generated by federal 9% low-income housing and 20% historic rehabilitation tax credits, both of which were syndicated by Hudson Housing Capital on behalf of investor Capital One, and subordinate loans from the city and the Maryland Department of Housing and Community Development (DHCD). Capital One also provided a construction loan that converted to a conventional permanent mortgage.

The pricing received was $1.01 per dollar of tax credit for each of the housing and historic credits. Maryland DHCD awarded about $790,000 in housing credits for the project in the summer of 2012.

Special Traits About Project

“There were a lot of things that were really good for our organization in terms of doing Fells Point Station,” states Constant. In addition to being the nonprofit’s first project in Baltimore and the product of a “great partnership” with Henson’s company, she says, “It was a wonderful way to create new housing in a community where we were able to offer a mix of housing options: some market-rate units, some working class units, and some affordable units.”        Of the 47 apartments, 13 are market-rate and 34 are affordable (i.e. LIHTC) units. Of the affordable units, 14 are restricted to households earning less than 30% of the area median income (AMI); 2 units, below 40% of AMI; 11 units, below 50% of AMI; and 7 units, below 60% of AMI. At present, 60% of AMI in the Baltimore area is $40,080 for a two-person household and $50,100 for a four-person family.

Gross monthly rents range from $620 for an affordable one-bedroom unit up to $1,550 for a market-rate two-bedroom apartment. Rents on some affordable units are subsidized by federal project-based Section 8 rental assistance.

Constant said the tiered income limits for the affordable units helped the project’s application score better in the competition for 9% federal housing tax credits.

Struggle to Gain Support

Additionally, the mix of market-rate and affordable units was needed to gain the neighborhood’s support for the project, which took more than a year to accomplish.

“The community didn’t see itself as needing affordable housing,” says Henson, who noted that neighborhood residents felt they already had enough affordable housing because of a nearby existing public housing development. “So we presented it as workforce housing. And suddenly light bulbs starting going off with them and with us as to what it really could be. So the idea of doing it as 70 percent affordable and 30 percent market-rate was something that we agreed on.”

Henson and Constant say the project was also special for saving an historic building – one of the first police stations in Baltimore and the home of the Eastern District until 1959. The building was later used by the Boys & Girls Club until 1996, when it became vacant.

By the time construction started on the new project, the building was in terrible shape. All the windows were missing, the roof had caved in, and there was significant water damage. “We were able to stabilize the interior of the building with some steel beams,” says Constant. All of the facades, masonry, and window openings were preserved.

Reward for Persistence

Fells Point Station also illustrates how persistence can reap rewards – eventually.

In 2006, Henson and his partners at the time had prepared a proposal to develop luxury condos on the city-owned site. “I was quickly disabused of that notion by the lenders at the time,” he recalls.

The ensuing collapse of the condo, housing, and financial markets prevented Henson from moving forward with an alternate plan for several years.

In September 2009, Henson reached agreement with the city to purchase the site for redevelopment. Around 2010, while he was meeting with Mission First folks – including Sarah Constant – in Baltimore, a spark occurred. “They said, ‘We’d like to do something in Baltimore,’” Henson recalls. “And I said, ‘Interestingly enough, I have a project in Baltimore that I can’t get off the ground because I can’t figure out a new direction for it.’ So we met and talked and the rest is history.”

More Than Just Housing

With residents of different income levels, Fells Point Station may also rekindle some of the experiences that Henson went through as a youngster in Baltimore.

“I grew up in public housing – I’m a little old now – at a time when public housing was actually mixed-income housing, where most of the people worked and had an opportunity to not just live in public housing, but had an opportunity to use it as a springboard for the future.        “Part of that was that young kids like myself could walk out the door and see people who had careers and were building careers, not just people standing on a corner collecting a check.

“So what I try to do basically is to build things where young people who are living in these neighborhoods have an opportunity to see the other side of the world, and not just an opportunity to participate in a program designed to lower their rent.”

Today, all 47 apartments are occupied and the sponsors are trying to line up one or two tenants for the commercial space. “We don’t have the retail occupied yet,” says Henson. But we’re working on it.”