Fallout: The Financial Crisis

Bad economy stalls Baltimore makeover

Marketplace Staff Mar 20, 2009
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Fallout: The Financial Crisis

Bad economy stalls Baltimore makeover

Marketplace Staff Mar 20, 2009
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TEXT OF STORY

KAI RYSSDAL: We’ve all been paying a lot of attention to the monthly unemployment rate: 8.1 percent at the moment. But that is obviously not the only thing the Labor Department tracks. They gave us another snapshot today of how deep this recession is getting. The monthly mass-layoff report came out this morning. That’s more than 50 people being cut from any one company. There were, the department says, almost 3,000 mass-layoff actions, they called it, last month. Putting 300,000 people out of work.

With fewer people, big companies aren’t so hungry for new office space. And that’s a reality that’s playing out on the streets of Baltimore, Maryland. The recession is holding up a project to turn one of that city’s toughest neighborhoods into a hub for biotechnology firms. Cathy Duchamp reports.


CATHY DUCHAMP: If you want to see neglect, come to East Baltimore. Plywood cove the windows and doors of old, brick-row houses. Weeds and stray cats occupy empty lots. People hang out on grimy, marble stoops. But change is coming. Jack Shannon leads me on a tour of what he calls the new East Baltimore.

JACK Shannon: Taking these vacant, derelict, in some cases, lead-contaminated properties and turning them into sustainable, energy-efficient home ownership opportunities.

Shannon is in charge of a nonprofit that plans to turn this neighborhood of last resort into a national model for urban redevelopment.

SHANNON: If we slog away at this together we actually can create something that offers longtime residents the opportunity to stay here if they desire, and at the same time, newcomers to take part in a green, thriving community right in the heart of the city.

Picture a campus, with new offices and apartments, renovated townhouse’s, and a big park. The economic engine of the development: a biotech hub next to the Johns Hopkins Medical campus. It’s supposed to create thousands of jobs. But almost half the labs sit empty, idled by the recession.

SCOTT LEVITAN: The challenge now is to ride out the storm, get over the Valley of Death.

Scott Levitan is in charge of leasing biotech office space for his real-estate company Forest City. Levitan says this public-private deal was big and complicated even before the recession. It has a $1.8 billion budget. But Levitan was confident, at least at first.

LEVITAN: When I came to Baltimore, you know when I moved here in 2006, I thought I’d do five leases in the building, and it would be full.

Levitan says the credit crunch broke the business model for the biotech park. Forest City bet on attracting big pharmaceutical companies. But the firms have scaled back scientific research. Instead, they’re buying up smaller companies with drugs already in the pipeline, a safer return on investment. So Levitan is stuck trying to recruit biotech startups, many that are just struggling to survive. It’s forced Levitan and Forest City to take the long view.

LEVITAN: We’re probably not going to make a killing on this first building. But we’ll do fine. Let’s get the market. Let’s establish ourselves.

It’s not just developers who feel stuck. Long-time East Baltimore residents say promises have been broken.

DONALD GRESHAM: The insecurity of not knowing who’s holding your life in their hands. Living in limbo for so long.

Donald Gresham bought a row house in East Baltimore twenty years ago, after living on the streets. But he gave up the keys to his home a few weeks back. It’s slated for demolition to make way for a new charter school, where the kids of all those biotech workers would go. Gresham’s been promised a re-habbed home in the neighborhood. Problem is, those re-habs aren’t ready. The developers say it’s because banks aren’t making construction loans. Gresham doesn’t believe it.

GRESHAM: I feel like I’m homeless again. That experience of knowing that I can never go back to my home again? It hurts. It’s very painful for me.

Developers say relocated homeowners were paid on average $160,000, a lot more than their homes were worth. Scott Levitan says investors remain committed to building a new East Baltimore.

LEVITAN: Our company has $47 million equity in this project. The city, the state, the philanthropic organizations have another $120 million invested in it. And so..

.

DUCHAMP: So you’re not walking away.

LEVITAN: No, ha, ha, ha. We’re not.

A nervous laugh about an ambitious project trying to tough out the recession.

In Baltimore, I’m Cathy Duchamp for Marketplace.

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