In the heart of West Baltimore, a once-blighted site is witnessing an extraordinary transformation that could serve as a blueprint for cities nationwide. At the center of this effort is MCB Real Estate, which recently closed on $44 million in financing for a new headquarters for the Mayor’s Office of Employment Development (MOED) at Reservoir Square. This financing, a milestone deal finalized in December 2024, marks the first tax-exempt bond package of its type in Baltimore in three decades.
The story of Reservoir Square begins modestly. In 2017, the project was initially funded with just $2 million in state funds awarded under Maryland’s Project C.O.R.E. program. These initial resources were targeted at demolishing the dilapidated Madison Park North housing complex—an eyesore and symbol of disinvestment for years. Rather than focus on a single-phase redevelopment, MCB and its partners devised a phased approach to capitalize on broader market shifts and community priorities, steadily layering public and private capital to scale the project’s ambitions.
The financial structure behind Reservoir Square’s phase two, which revolves around the new MOED employment hub, is a case study in complex capital stacking and public-private cooperation. Conventional bank lending proved inadequate due to a persistent appraisal gap: the projected development costs for the site far exceeded likely returns based on prevailing market valuations, a legacy of historic redlining and economic exclusion in West Baltimore.
Recommended For You
To bridge this gap, the development team turned to less traditional solutions, ultimately engineering a multifaceted deal that included city and state grants, several rounds of bridge loans and tax-exempt bond financing orchestrated through the Maryland Economic Development Corporation (MEDCO).
Key to the project’s viability was the creative use of a lease revenue bond structure. MCB sold the underlying land for the new workforce hub to the City of Baltimore, which then ground-leased it to the nonprofit P3 Foundation, acting as the conduit borrower. MEDCO issued $24 million in tax-exempt bonds, leveraging the city's commitment to lease the completed building as collateral.
Bond proceeds were supplemented by grants from Baltimore, the Maryland Department of Housing and Community Development and the C.O.R.E. program, each of which was timed and structured to optimize tax efficiency and minimize unintended operating costs.
This elaborate bonding arrangement replaced a more traditional private lease structure that would have left the city exposed to unsustainable operating expenses and high taxes on subsidies. By using tax-exempt bonds, which carried lower interest rates than conventional loans, the development partners were able to cap MOED’s rent at $19.65 per square foot with modest annual escalation, making the city’s long-term budget commitments feasible.
The financing package also required intricate coordination with the Neighborhood Impact Investment Fund, a local CDFI, to supply predevelopment bridge loans and ensure that all grant disbursements and debt tranches aligned with construction milestones and bond market expectations.
Negotiating these layers was anything but straightforward. The structure, designed to maximize the impact of public funds while attracting private investment, survived last-minute setbacks—including the withdrawal of a major New Markets Tax Credits provider—by swiftly adjusting its strategies and closing funding gaps with additional competitive grants and streamlined lease structures. The result was not only the successful close of a $44 million bond issuance but also a model for leveraging city leasing power and diverse capital sources to achieve an outsized impact.
With the bonds in place, construction on the new MOED hub—a four-story, 68,000 square foot facility consolidating the agency’s scattered offices into a single, purpose-built location—began in early 2025.
The ripple effect of this financial engineering is visible far beyond the employment center itself. What began as a $2 million public investment has now catalyzed over $100 million in cumulative development at Reservoir Square, with more phases on the horizon and ultimate planned investments exceeding $200 million.
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more inforrmation visit Asset & Logo Licensing.
Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
