Exelon site

Shown is the site of the old Allied Chemical plant, between Harbor East and Fells Point, which will be the site of the new Exelon headquarters. (Gene Sweeney Jr., Baltimore Sun / February 1, 2012)

For a city whose last Fortune 500 company was about to be acquired by an out-of-town corporation, there was not just consolation but actual excitement over one of the deal sweeteners: Chicago-based Exelon Corp. promised to build a new downtown office building for the merged company, the first such construction in Baltimore's central business district since 2004.

The competition was spirited among a handful of developers: They produced architectural renderings of shiny towers and lined up contractors and financing packages. One had a request en route to the mayor proposing a tax break to make his Inner Harbor parcel even more attractive. Meetings, presentations and behind-the-scenes lobbying ensued to land the prize.

But last week, in an earlier-than-expected announcement, Exelon dashed the hopes of many when it announced the winning bid: a waterfront parcel in the Harbor East area, which in recent years has steadily drawn businesses away from the traditional downtown core. Once again, the score was bakery magnate and Harbor East developer John Paterakis Sr.-1, downtown-0.

M.J. "Jay" Brodie, president of the Baltimore Development Corp., was among those caught off-guard when Exelon, which is in the process of a $7.9 billion acquisition of Constellation Energy, announced its decision. The company had said that it would not reveal where it would build in Baltimore until after the deal was completed, and it still needs the approval of the Maryland's Public Service Commission, which meets later this month.

"I was very surprised," said Brodie, longtime head of the city's quasi-public economic development arm. "I wouldn't have guessed the outcome either."

And there were those who were dismayed that Exelon rejected downtown, with its ample office vacancies and empty lots, and headed east to an area that is fast becoming a glitzier alternative to the historic central business district, with firms such as Legg Mason and Morgan Stanley setting up shop there.

Now, those who advocate for downtown say the city needs to reconsider the tax breaks that have favored new developments like Harbor East at the expense of the aging parts of downtown. Despite the upscale nature of the boutique- and restaurant-filled Harbor East, for example, the area remains in an enterprise zone that reduces property taxes for new buildings.

"The challenge is there are many commercial properties paying the highest property taxes, and they are in the older parts of town and they're losing tenants to the newer parts," said J. Kirby Fowler, president of the Downtown Partnership, a nonprofit that looks out for business and residents in the city's central core. "We need to step back and consider how incentives are doled out, and how we can be proactive and find ways to help older buildings in the core."

That the Harbor East area, and Harbor Point specifically, have become so attractive represents a remarkable transformation — and one cheered even by those who would have preferred Exelon to build downtown.

For more than a century, beginning in 1845, what is now the 27-acre Harbor Point was the site of a chrome factory that leached toxic industrial chemicals into the ground and harbor. It took a decade and more than $100 million worth of remediation to contain the cancer-causing chromium within a slurry wall and beneath layers of impenetrable material at the former AlliedSignal plant until the Environmental Protection Agency deemed it safe for redevelopment in 1999.

But for all its environmental damage, the site has long been viewed as perhaps the last, best undeveloped real estate on the harbor, with sweeping water and skyline views.

"Let's be honest: It's a very good development site," said J. Joseph Clarke, of J.J. Clarke Enterprises, whose own bid to build a downtown tower for Exelon lost out to Harbor Point. "It's surrounded on three sides by water. That's a big win for the city. We should all be glad [Exelon] found a home there."

Still, Clarke, who proposed a 25-story office building on the site of the old Southern Hotel at 1 Light St., said he thought his bid hewed closely to what Exelon had requested, particularly since the corporation asked for energy efficiency and other green measures — fittingly, given that the new building will house the company's renewable energy division.

"We were the only site with our own subway stop," Clarke said. "We have 11 bus lines. We thought that was a strong suit."

There was no shortage of downtown suitors, with prime spots such as the former McCormick & Co. site at Light and Conway and the old News American parcel, at 300 E. Pratt, being used as surface parking lots while awaiting development.

Brodie thought the McCormick site in particular was a development waiting to happen.

When Stephen Gorn, president and chief executive of Questar Properties, bought the site of the former spice company plant, Brodie said he wrote him a note saying he had just bought the best unbuilt site downtown and inviting him to a chat whenever he decided what to do with it.

That eventually led to Brodie bringing Gorn's request for a tax subsidy for his proposal — an office building for Exelon, apartments, retail and parking — before the Baltimore Development Corp.'s board. Brodie said the board agreed to recommend to Mayor Stephanie Rawlings-Blake that she approve an incentive.

But before she could act on the BDC recommendation, Exelon made public its decision to go with Harbor Point.

Rawlings-Blake spokesman Ryan O'Doherty said he didn't know whether the mayor had even seen Gorn's request before the Exelon announcement, but said that she believed Harbor East could grow without harming downtown.