100-Year-Old Urban Warehouse Attracts $10M for Mixed-Use

When the third-generation owner of family-run Meyer Seed Co. closes shop after more than a century of supplying Baltimore from their downtown depot, what does he do with the squat, nondescript warehouse his business once relied upon? He offers it back to the community and coasts into retirement with a $10 million disposition.

He didn't have to do much to make that happen: a savvy broker and skilled redeveloper, both with solid local ties, worked their respective magic behind the scenes. Sure, 52,000 square feet of warehouse space in the downtown district of a port city where industrial demand is record high might make for an easy sale. In fact, in the wake of closing, one of the sellers’ representatives, Owen Rouse, MacKenzie Commercial Real Estate Services’ vice president of investment sales, is modest. “I was just doing my job.”

But on a closer look, the deal wasn’t so simple. Though Baltimore’s industrial market currently finds itself in its “fundamentally healthiest standing in the past 25 years,” according to analysis from LoopNet parent company CoStar, with vacancy rates compressed to all-time lows, Meyer Seed Co.’s location no longer makes sense for warehouse use.

When the single-story brick flex space was built in 1920, its waterfront post where the Patapsco River meets the Inner Harbor was a hotbed for the industrial revolution. But decades of densification have made the narrow streets logistically cumbersome for distribution purposes.

Gentrification also plays a role here, with the principle of highest-and-best use prevailing. Now, the grittiness of Fells Point’s cool, cobblestone streets and industrial relics has blurred into the glitziness of the upscale Harbor East neighborhood several blocks over to make for an evolving, hipster junction ripe for redevelopment, Rouse told LoopNet.

"I realized there was a big opportunity here, but I don’t really want to talk about the ocean. Tell me about the iceberg.”

Owen Rouse, MacKenzie Commercial Real Estate

The property’s location, at S. Caroline and Aliceanna, is in the shadow of a Whole Foods and the T-Rowe Price headquarters, with an Orangetheory Fitness across the street and a Sephora, for example, around the corner.

Given all of these factors, MacKenzie never even considered positioning the warehouse as a warehouse, Rouse explained. “We understood the opportunities for conversion, and the first thoughts were to sell or lease it to a store operator.”

But the MacKenzie team had also been observing unprecedented office in-migration, especially in the property's submarket, along with the city's “record-setting multifamily absorption throughout 2020 and 2021,” according to CoStar analysis.

“I think there’s more here,” Rouse remembers realizing. “But I don’t really want to talk about the ocean,” he said. “Tell me about the iceberg.”

Timing the market was tricky, especially with new multifamily projects hitting an inflection point, construction costs climbing rapidly and the neighborhood’s sometimes arduous historic preservation review process unavoidably looming.

“It was a foot race against time,” Rouse said. “We needed a scripted narrative to be clear on the opportunity,” he said. “We were not only focused on the sales process, but also on the potential purchaser’s process,” knowing they’d have to go in front of Baltimore City Commission for Historical and Architectural Preservation (CHAP).

Among six offers, a local developer who had demonstrated prior success with CHAP reviews had a leg up in MacKenzie’s eyes.

Chasen Companies, a construction project management and real estate development team, had also secured an adjacent lot on Aliceanna Street by the time it closed this deal. With the two parcels united, the Chasen team saw an opportunity to “connect Fells Point and Harbor East together,” Chief Business Development Officer Drew Peace told LoopNet.

"But the deal was contingent on CHAP approval … for height, mass and scale," Peace continued, "and the challenge, obviously, is that that takes time.”

Chasen brought plans to CHAP and to a simultaneous review process by Baltimore’s Urban Design & Architecture Advisory Panel (UDAAP). The plans honored the historic seed depot’s façade, while promising a full site-plan redevelopment that included sidewalks, bike lanes, trees and streetscape features around the block.  

The firm, which had mostly focused on a smattering of smaller-scale developments before, is working with JLL to lease around 60,000 square feet of ground-floor and mezzanine-level retail to “big, national credit tenants,” Peace said, and they’ve already gotten some “heavy interest.”

Atop the existing Meyer Seed building, Chasen has already started construction on the Whitney, a multifamily development of nearly 200 units comprising 1- and 2-bedroom, “luxury” rental apartments with amenities such as billiards and movie rooms, bike storage and “significant outdoor space.”

Chasen was able to take on a bigger project like this partly thanks to its prior wins with CHAP, but also because of a new, continuing partnership with MacKenzie.

Compared to Chasen's prior projects, which might involve renovating, rebranding and leasing, the scale of a massive mixed-use redevelopment like the Whitney is “harder to do and it requires more focus,” Rouse continued.

MacKenzie is going to take on some of the “back-office property management” for Chasen, Rouse said. “I think offloading the management allows them to free up intellectual time, capital, manpower and bandwidth to make that transition without worrying about things like 'who’s not paying rent,' and 'did that light bulb get fixed?'"

This deal may be indicative of an ongoing trend that involves redevelopment of former industrial space in Baltimore — and the Fells Point and Harbor East submarkets, in particular. “We expect additional well-located sites, primed for repurposing and redevelopment, to become available in Baltimore City based on this and other sales outcomes,” Rouse said in a press release.

In contrast, infill opportunities shouldn’t be taken at face value, Rouse told LoopNet. “This is a colonial city that’s been around for 200 years. Basically, if land is left over in an old market, it's probably left over for a reason,” Rouse explained. “Common sense would say that those who are in a controlled position are intentionally metering their development on the land they own. So, what’s left?” he posed. “Redevelop, repurpose and upcycle.” But that usually requires “either a high level of capital, a high level of talent, or both.”

Despite the complexity of this project, Rouse said he wasn’t surprised by the outcome. “We had a tight process, and we only talked about what we knew about.” Meyer Seed Co.'s owner had been a college friend of Rouse's colleague Mark Deering, a partner with MacKenzie who originally sourced the deal, and Chasen had already learned the ropes with CHAP. At the end of the day, Rouse said, “relationships matter in real estate.”