In Baltimore, a landmark building in the Station North Arts and Entertainment District has been renovated with help from Reinvestment Fund. The Chesapeake Building, a 30,000 square-foot property named for the former Chesapeake restaurant near the city’s Penn Station, was vacant for some 20 years and surrounded by decaying real estate that deterred investors as much as it did shoppers and potential tenants.
Reinvestment Fund financed the initial renovations of the property in 2012, which included restoration of the exterior facade and fit out of 70% of the first floor, which now includes a new restaurant. The Chesapeake is a farm to table restaurant that focuses on fresh, local ingredients. In 2014, Reinvestment Fund made a second loan that will include the fit out of a second restaurant, construction and fit out of the second floor to include 2,500 square feet of event space and 2,600 square feet of office space, and renovations to the third and fourth floors to include six loft style apartments.
The project is a crucial piece to revitalizing the Station North neighborhood, which is a short walk from major public transit, including Amtrak and MARC commuter trains. Baltimoreans have also been eager to see this landmark building come back to life in a neighborhood that is home to several successful restaurants, an independent movie theater and a multipurpose art gallery. With Reinvestment Fund’s help, the historic Chesapeake (built in the 1890s) is poised to once again become a vibrant Baltimore destination.
“It was dilapidated, there were many vacant buildings,” said Ernst Valery, president of Ernst Valery Investments Corp., the developer who bought the property in 2010 from the Baltimore Development Corporation.
Valery needed a loan to complete the project, but was turned down by banks and other lenders who saw the project as too risky, especially as it was anchored by a restaurant, whose industry has a notoriously high failure rate.
“Conventional lenders couldn’t understand it,” he said.
So he turned to Reinvestment Fund which provided a construction and permanent loan to fund the exterior renovations and build out the ground floor along with significant borrower equity and historic tax credit equity.
The project met Reinvestment Fund’s goal of helping to revitalize low-wealth communities. “They want to be involved with projects that contribute to communities,” Valery said.
That’s a goal shared by Valery, who aims to rebuild declining neighborhoods, and do so in an environmentally sustainable way, while also ensuring a good return for his investors.
“The bulk of what we do is in neighborhoods that are undervalued,” he said. “We develop real estate that goes beyond bricks and mortar.”
From the developer’s point of view, using the Reinvestment Fund capital rather than equity for a portion of the project’s costs allowed him to build a reserve for the restaurant before it established a client base. The restaurant opened in June 2013.
In the lot behind the building, Valery and his partners are planning to build 80 apartments which will be provided at below-market rent—enabled by tax credits that are available to developers of blighted areas—to the artists that Valery is hoping to attract to the neighborhood. He plans to rent apartments to the “creative class” of tenants, such as those from the nearby Maryland Institute College of Art (MICA).