Monday, December 17, 2007

Meridian Square

The county wants to purchase a 15,000 square foot floor of the proposed 60,000 square foot Meridian Square office project in Oakland Mills. The project is proposed for the site that formerly housed a gas station next to the village center. The developer says that he needs the county commitment in order to secure financing for the building.

Rubbish.

The developer needs the county commitment so that they can secure “favorable” financing for the project. The project could move forward without the county purchasing a floor. It would simply require that the developer put up more equity.

I have no problem with the notion of having the county spread offices and services around the county as opposed to one central location. If the county can serve as a catalyst to redevelopment I am all for it. My problem with this deal is the way it has come down. The developer buys the site, announces the project and then says he can’t do it without county support. To me that says he should have never bought the site in the first place.

The way it should happen is that the county buys the site, solicits development proposals and then picks a proposal that offers the best terms to county.

If the county does proceed with this deal they should get the space below cost in recognition of the contribution their commitment makes to the project. In other words, the county needs to get a real sweetheart deal from Metroventures.

10 comments:

Tom said...

And the developer gets the community to do its bidding at a County Council meeting!

Bandito said...

Tom, that is because the community is getting something of value from the developer. Namely revitalization, jobs close by, etc.

wordbones said...

As I said, as long as the government gets a sweetheart deal (and that means paying less than $200.00 per square foot) then it's okay with me.

-wb

Freemarket said...

I agree that the County should get something of value from the developer since their commitment makes the underwriting on this project work. A sweetheart deal on the price would be nice. However, exactly what the County gets is a negotiation point that is up to the County Exec. After all, it’s his budget. The CE might be of the opinion that the revitalization benefits of this building are worth more than saving some bucks on the price, and he should just commit to buy it at a market price to keep the project moving. If that is how the CE is looking at it, I don’t think there is anything wrong with that. At the end of the day this is an executive decision. The OM village center needs this building.

On a side note, the County involvement is not all good for the developer because now the County Council is asking questions, etc. This stuff slows the project down and makes headaches for the developer.

wordbones said...

fm,
I agree that there is a residual benefit to the county in that it helps Oakland Mills. Make no mistake however, that paying $266.00 per quare foot for this location equates to a major windfall for the developer. Also, the developer could proceed with the project today if he wanted to. It would simply require him to put more equity in the project. The delay he is experiencing is of his own doing. His cash requirement will be much less if he has a pre sale to the county for 15,000 square feet so he is basically puting all his eggs in the taxpayers basket. That's why he waits.

In my opinion, this project is ill conceived. Oakland Mills is not an office location. It never has been. The Rouse Company recognized this when they renovated the village center and eliminated the office component that was part of the original center. A 60,000 square foot office building is simply too large. A scaled down project might have a better chance of economic success. Keep in mind, that right now there is about 250,000 square feet of vacant office space in some very nice buildings in Town Center in a well established office location. This project will compete directly with that economic reality.
-wb

Freemarket said...

I doubt the developer has the option of putting in more equity, so getting the County on board might be an economic necessity. However, it is hard to argue with the other points you make. As bad as OM needs redevelopment, maybe an office space is not the way to go. Just out of curiosity, and since you are the real estate expert, what does new office space sell for per square foot in Town Center?

wordbones said...

fm,
The only office condominium in Town Center that would compare with this is 10910 Little Patuxent Parkway (near the hospital). There is one condo unit for sale in that building and its listed for $290.00 per square foot. You can also currently purchase an office condominium at 9520 Berger Road for $275.00 per square foot (new construction). There is 16,398 square feet available for purchase in that building. In the Dorsey Hall Professional Park you can purchase an office condo for somewhere between $210 psf and $250.00 psf. There is about 3,500 square feet available in that project.

While at first blush these numbers would seem to support a price of $266.00 per square foot, keep in mind that these units are an average of 1,200 square feet. The bigger the suite the more cost savings (restrooms, metering, hvac, etc.)and thus the better deal you can cut.
-wb

David W. Keelan said...

WB is right. The Village Centers were not meant to house Class A office space. There is not appropriate infrastructure to handle traffic or parking for a 60K building.

How does this mesh with the Town Center plan?

It isn't the CE budget after the CC approves it. The CE can't just take $4M from an approved budget and spend it any way he wants. Thankfully the CC sought a legal opinion and straighted Ulman out on that point.

Will other developers be given the same consideration or just those that have contributed $3K to Ulman's campaign?

What about the points that the CE made in arguing for a new County Complex - centralize administrative functions, create more effecient government by housing everyone in one complex, reduce expenses by reducing multiple office space, etc.

Why can't the CE answer the County Council's questions and begged for the issue to be tabled so they could get their act together.

D-

wordbones said...

David,

It is disengenuous to suggest that the contribution to Ken's campaign had anything to do with this. Plently of people in the development community contributed heavily to both candidates campaigns. Why would Ken favor one developers contribution over anothers?

There simply aren't that many 15,000 square foot office requirements to pass around.

-wb

David W. Keelan said...

WB,

I wrote a post about developer contributions. Both candidates for CE recieved almost 50% of there contributions from developers.

So I understand your point that Ken is likely not favoring MetroVentures over any other developer for $3K.

I am saying that despite Ken's election year rhetoric developers will fare very well during his administration.

There is no need for the county to go to this location, or this building type to be built in this location because it was never envisioned for these areas, their is no infrastructure to support it, it contridicts everything the CE argued for in his plea for funding for the new complex.

The CE can't explain why the administration is contridicting itself. It got caught with their pants down because Greg Fox found out about it and got the law office involved.

What are the other options?