Harborplace plans revealed: A luxury hotel and $7,000 rents

MCB Real Estate’s ambitious plan to remake the Inner Harbor, with some of Baltimore’s priciest apartments and office space, may struggle to attract investors even if it is awarded one of the largest tax breaks in city history, according to a confidential report commissioned by the Baltimore Development Corp.

The report, meant to show city officials how a property tax abatement would impact the Harborplace project’s financial viability, provides the clearest picture yet of what MCB wants to build and how much it will cost.

The BDC, Baltimore’s quasi-governmental economic development arm, received the report in August before it gave preliminary approval to a tax break that the report’s authors estimate could save MCB up to $366 million in property taxes over 25 years. The Board of Estimates, the city’s spending board controlled by Mayor Brandon Scott’s office, could give final approval to an incentive package for Harborplace by the end of the month.

The report, reviewed by The Banner, lays bare the financial realities facing the Inner Harbor redevelopment. And it reveals how the project has changed in scope since MCB cofounder P. David Bramble, alongside Scott and Gov. Wes Moore, first unveiled his plans three years ago.

Among the report’s details:

• A previously undisclosed waterfront luxury hotel with 212 rooms and rates averaging $550 per night.
• 100 apartments in the same building with average monthly rent of $7,000.
• A second residential tower with 476 units charging an average monthly rent of $4,438, which is higher than other nearby luxury towers.
• A retail building dubbed “The Sail” for its shape and an office building that would have rents nearly double those of similar projects.
• The privately financed portion of the Inner Harbor project, originally estimated to cost $500 million, has ballooned to $820 million.

The report, compiled by Columbia-based public finance consultant MuniCap Inc., is based on MCB’s own inputs and market data. Neither the tax break nor the projections are final. The project could perform better or worse than outlined in the report.

Alexandra Hughes, a spokesperson for MCB, said in a statement that the company has “not been privy to the MuniCap analysis” and has “no insight into what’s contained in the report.”

Scott’s office is still negotiating the final terms of the tax incentive and other aspects of the Harborplace project, a spokesperson said, and any news coverage of the figures contained in the report would be “premature and speculative.”

“Once a tentative agreement has been reached, it will be presented to residents and the Board of Estimates for their approval,” Tracy King, the spokesperson, wrote in an email. “The mayor is committed to securing a deal that catalyzes long-term growth across the City, and delivers a Harborplace that benefits all Baltimoreans.”

Created earlier this year by state lawmakers, the Downtown RISE PILOT, or a payment in lieu of taxes, could wipe away 95% of property taxes for 25 years on developments like Harborplace. Because of inflation, the value of the tax break would diminish over time, though still remain significant: If the PILOT was awarded all at once, the proposed Harborplace incentive would be worth $174 million today.

The once-vibrant center of the city’s commercial district is at a critical juncture. The green-roofed pavilions opened in 1980 and attracted massive crowds for years. However, as many shopping malls struggled, Harborplace changed hands and fell further into disrepair. MCB, with the blessing of city leaders, bought the pavilions out of receivership in 2022.

Today, the pavilions are still standing, though they are emptier than ever. Scott said last week that the pavilions should be demolished.

MCB is still working to secure the financing necessary for what would take the pavilions’ place, and the report underlines that challenge.

None of MCB’s four proposed buildings would meet what the report terms a “market appropriate return,” which is the minimum amount of profit investors would generally accept when deciding which projects to fund. The building closest to generating the needed return is a proposed 125,000-square-foot office building that would have to charge a rent “80% higher than market average.”

The report said MCB expects it could command $46.95 per square foot. CoStar, a real estate analytics firm, said the highest office rent it is aware of in central and southeast Baltimore is $35 per square foot. Bramble, the public face of the Harborplace project, said previously he wouldn’t build the office building without an anchor tenant in place.

At an average stay of $550 a night, the proposed 212-room hotel would charge one of the highest rates in the city, the report said. Baltimore’s hotel occupancy rate fell during the pandemic and was slow to rebound, but hotels in the city’s central business district have had a strong year compared to other East Coast cities, according to Didio Pequeno, director of hospitality market analytics at CoStar.

The closure of the Sheraton Inner Harbor Hotel helped boost occupancy for competitors, Pequeno said, and the Inner Harbor remains a “great location for a hotel.”

The hotel building would also contain apartments, and their average size would be 1,344 square feet and command a projected $7,000 average rent. Units in the other residential tower would average less than 1,000 square feet, with average rents of $4,438.

While MCB has not publicly committed to a construction timeline, the report said the residential towers could break ground in October 2027.

The Sail, a 150,000-square-foot building that would feature indoor and outdoor dining and shopping, is scheduled to break ground in December 2027. The anticipated rent for those spaces would be more than double the current market standard “because of amenities and unique product offering,” the report said.

Still, The Sail, which the report described as Harborplace’s marquee building, has the largest gap between the return investors typically want and what’s projected for the four buildings.

It’s unclear how much weight the BDC gave the MuniCap report in its preliminary approval of the PILOT after closed-door deliberations. Scott praised that Aug. 28 decision.

Tamarah Lawrence, a spokesperson for the BDC, said the economic analysis report was only part of the evaluation.

“Inputs such as projected rents and hotel rates are estimates, not final prices or lease terms, and should be considered alongside the project’s broader economic impact and community benefits,” Lawrence said.

Since the preliminary approval, the agency and the mayor’s office have declined to publicly share any information about how they are evaluating the project.

Higher construction costs, stubborn inflation and rising interest rates have dogged commercial projects across the country in recent years. For example, the estimated cost to rebuild the Key Bridge has skyrocketed since 2024.

Whiting-Turner Contracting Company, a local construction giant contracted by MCB, now estimates that Harborplace will cost more than $820 million to build, according to the report. That does not appear to include the $400 million in public funds, separate from the PILOT, that MCB officials previously said was needed to reconfigure nearby streets, rebuild the waterfront promenade and improve other public spaces.

While Baltimore voters approved a 2024 ballot question favoring the redevelopment of the Inner Harbor, MCB’s proposal has faced consistent criticism. A group of seven residents recently filed a lawsuit attempting to block the demolition of the pavilions. Previous legal challenges to the project have been unsuccessful.