Equitable building buyer will take Baltimore's apartment tax break, but says it wasn't necessary

I will always advocate for development and project support to attract development, I am saddened to see something like this take place.  You really cannot fault the developer in this case as their job is to get it built, profitably, on time and budget. They simply took what was offered to them.  But you have to question a system, elected officials and municipal planners that create this situation

The downtown apartment market is so hot right now, the new owner of the Equitable building said the $7.2 million acquisition would have happened without the city’s new tax credit for apartment conversions.

Of course, the buyer, Jerry Karlik, and his Chicago-based JK Equities LLC also got a great deal, paying 28 percent less than the $10 million asking price for the 10 S. Calvert St. building.

But Karlik said it was the high occupancy in nearby buildings and Baltimore’s proximity to New York and Washington, D.C., that were key to purchasing his company’s first property in Baltimore.

“We looked at just about every [apartment] building and saw occupancy was at 100 percent with waiting lists, so the markets seem to be trending that way,” he said. “We like the market and we think the market has lots of upside, especially with everything going on downtown with more adaptive reuse buildings over the last four years.”

Karlik is something of an old hand at adaptive reuse. His company got started on the trend toward new urban residential housing in the early 2000s, converting one of the first obsolete office buildings in Chicago — a 700,000-square-foot building — to 320 condominiums.

The company specializes in condos, following a strategy of renovating upper floors for residential units and building first-floor retail.

“What we like to do is keep the retail component and sell the rest of it,” Karlik said. “But with respect to residential [rentals], we build, we hold, and we get maximum value.”

The Equitable building was an intriguing property for having been one of the few structures to survive the Great Baltimore Fire of 1904, Karlik said. And for a 225,000-square-foot building constructed in 1891, he said, “the exterior of the building is in excellent shape so there’s very little work to be done there.”

As in many office conversions, Karlik plans to take the luxury approach, though it won’t likely be ultra high-end.

“It’s going to be luxury in the sense that we’re planning a full array of amenities: a full-time doorman, a fitness center, a party room, a rooftop deck,” Karlik said. “We’re not going to do a bocce court, but we’ll see what the market demands. We’re doing a market study right now.”

Parking for the 180 units is still an open question. The acquisition doesn’t include a garage, so Karlik said he is working on deals with nearby building and garage owners to “offer parking at reasonable prices, either almost next door or within a half-block.” Karlik isn’t concerned that a lack of parking will be an issue in renting units.

“Obviously in New York, parking is almost a nuisance. Baltimore is a little different,” Karlik said. “But being downtown, we think we have plenty of options to give convenient parking to our tenants. Our tenants are going to be 25 to 35 years old and we think many will probably use public transportation.”

Karlik expects to invest $30 million in the property, including the purchase price, and said the construction will likely begin “sometime in 2014” with completion in 2015.

“We’re thrilled to be in the market,” Karlik said. “With all the activity downtown, it’s the beginning of the trend.”

Source: Baltimore Business Journal