Under Armor Rescues Billionaire Kevin Plank’s Shaky Port Covington Project
Former Under Armor founder Kevin Plank’s Port Covington project in Baltimore City is one of the largest urban revitalization projects in the US. Earlier this week, Under Armour, announced plans to move its global headquarters to Port Covington, effectively saving the billionaire from a forced exit of the project by Goldman Sachs, according to Baltimore Brew.
Plank’s Port Covington project is a much different one than what was initially announced in 2016. Plank personally bought up all the land in the area and sold it in 2016 to the athletic footwear and apparel maker for $70 million. During that period, a series of bonds issued by Baltimore City left taxpayers on the hook for $137 million.
On Monday, Under Armor announced a scaled-down version of the Port Covington project. The move saved the billionaire from a forced sale of his land around the project area. Several years ago, Plank entered into a joint venture agreement with Goldman Sachs in return for construction financing.
The venture notes that if Under Armour “determines not to proceed with the development of its headquarters or moves its headquarters anywhere that is not within the Port Covington peninsula,” Goldman Sachs has the ability to force Plank to sell his Port Covington property. Now it’s important to note that Plank owns everything north of Cromwell Street and west of Hanover Street, while Under Armour owns the land south of Cromwell Street.
Here’s Goldman’s legal jargon titled “Under Armour Exit Event” that explains what happens if Under Armor doesn’t commit to Port Covington:
Monday’s press release was timely since the land has sat dormant for seven years with the initial promise of building a city within a city. What becomes more evident is that Plank needed to show Goldman Sachs some progress the land would be developed.
Plank’s vision from the start was a moon shot. The project has since been drastically scaled down. Under Armour’s current CEO Patrik Frisk blamed it on a “post-Covid reality.” Their newly proposed Port Covington headquarters will be much smaller than 2016 designs, mostly due to today’s hybrid work environment.
So how much scaled back?
Well, in 2016, Plank promised Under Armour would build a 3.9 million-square-foot campus at Port Covington. He even said the city within the city would add 10,000 plus jobs to the community. Now the company has committed to 310,000 square feet of new space and has shrunk its workforce after years of layoffs to 1,700. The addition of local jobs is expected to be a fraction of what was initially proposed.
Plank also said Baltimore would receive $6.9 billion of offices, apartments, retail district, and affordable housing, all under original designs. This was more than enough for the city of Baltimore to issue a $660 million of city-backed TIF (tax increment) bond financing for the project.
From the beginning, the project seemed too good to be true. After 2016, the company’s equity tanked amid layoffs, restructurings, and accounting probes by the SEC.
After Plank was removed as CEO from the company in late 2019 and demoted to executive chairman and brand chief – his private real estate venture, Sagamore Development, was also rebranded as the Weller Development Co., operated by two of his close associates, as he took a step back. Though likely pulling the strings in the background.
For Plank to access the TIF bond, he would need Under Armour to commit to building at Port Covington. Such a move would allow him to refinance $77.5 million in property mortgages and receive $25.3 million in “soft costs” he claims to have spent on engineering, architecture, and lobbying costs for the project.
Billionaire Plank was “saved by the bell,” or instead, a press release.
Fri, 04/23/2021 – 18:40