City-backed rental complex struggles to keep residents
A city-backed apartment complex that opened a few years ago in West Baltimore is struggling to retain residents, according to recently filed documents.
The buildings were almost fully leased as recently as September, documents show, but a fifth of all tenants have since left Center\West in Poppleton. The developer, La Cité, fired its management company in response, according to the public disclosure to bond- holders on the project.
“We’re just repositioning. There’s not a lot to talk about,” said Dan Bythewood, president of La Cité. “Our strategy is just to lease it all back up, which isn’t hard for us to do.”
Center\West is a longplanned, multiphase urban renewal project that began under the administration of Mayor Martin O’Malley. La Cité, a New York-based firm, won the right to redevelop the area in 2005. The city acquired more than 500 properties in the predominantly Black neighborhood, displacing families and razing homes to make way for what was billed as a transformative project.
Nearly two decades later, La Cité has completed phase one of the project — two “luxury” apartment buildings called Avra and Cirro on North Schroeder Street. Most of the 262 units are market rate, with 53 units set aside for low-income residents.
Demolition and construction limped along following the Great Recession. At one point, the city attempted to end the redevelopment agreement with La Cité, resulting in a federal lawsuit that was later dismissed.
In 2015, the city approved up to $58 million in public financing for the project, of which about $12 million was drawn for phase one. Much of phase one’s financing came from a $56 million loan backed by the U.S. Department of Housing and Urban Development, making taxpayers liable for much of the money if La Cité were to default.
La Cité held a ribbon cutting at the buildings in 2018, but extensive water damage delayed their opening until 2019.
As of last fall, nearly all 262 units had been leased, but by the end of March, the total occupancy rate had dropped to 80%. In the bondholder documents, La Cité said the drop in tenants was “due to a poorly performing and non-compliant management company.”
That firm, Bethesda-based Ross Companies, stopped managing Center\ West in April, according to Tony Perichino, the vice president of residential operations for Ross. Perichino declined to comment further.
Dominic Wiker, development director at The Time Group in Baltimore, said the “gold standard” for apartment leasing is between 90% and 95%. According to Wiker, anything at or above that range indicates stability.
The apartment industry in Baltimore is competitive, meaning leasing and
management offices “need to be on the top of their game,” Wiker said, but demand overall is strong.
“Baltimore has successfully absorbed a lot of new units and that to me would be an indicator that the market is strong and growing,” Wiker said.
Christine Espenshade, a vice chairman at Newmark, said the market is especially strong in areas with nightlife, restaurants and views of the water, like Federal Hill, Brewers Hill, Canton and Harbor East. According to Espenshade, the overall occupancy rate for Baltimore apartment buildings is 95%.
That’s partly because most apartment complexes use a pricing model similar to airlines, she said. If occupancy dips below 95%, apartments often lower the rent until the occupancy rebounds.
“If you’re at 95%, you’re optimizing your rents,” she said.
Bythewood said he was “100%” confident the Center\West buildings will return to full occupancy soon and that phase two of the project — an age-restricted residential building — is moving ahead.
“All of that is absolutely cranking along,” Bythewood said.