'Town Center' Is Planned At Mall Site in Rockville

'Town Center' Is Planned At Mall Site in Rockville

The Washington Post

By MARYANN HAGGERTY

A New York real estate company Friday purchased the old Rockville Mall, a failed project that soon will be demolished to make room for new offices, apartments and stores.

The mall, which stands next to the Rockville Metro station, has been a washout since it was built as an early-70s urban renewal project. Its first owner went bankrupt, its second was foreclosed on.

But the newest owner said the site’s history doesn’t deter him. “There is no bad real estate, only bad assumptions,” said Mitchell B. Rutter, president of Essex Capital Partners Ltd., which specializes in buying distressed properties.

Essex will follow a city-approved plan to redevelop the 7.7-acre site into a $300 million “town center” with 1.5 million square feet of office space—the equivalent of about a half dozen sizeable office buildings—50,000 square feet of retail and 150 residential units.

The idea is to create a more walking-oriented area, with new roads that link the area to the city’s main streets, wide sidewalks, pedestrian plazas and street-front stores.

“It looks like a good match. Essex is quite willing to keep everything intact,” said Ruth G. Krasnow, a member of the Rockville City Council, which had to okay the sale because of the public-private nature of the town center plan. “This seems to be the sort of project he’s done before.”

Rutter wouldn’t say how much his company paid for the site, but pointed out that there were more than $40 million in loans on the property at the time of the 1991 foreclosure. “Clearly we’re not paying that much,” he said. Essex bought the property from Rockville Center Inc., a subsidiary of Marine Midland Bank Corp., which paid $15 million for the property when it foreclosed on it.

The hulking three-story mall is set to be demolished this month. A smaller building on the site already has been razed, and work is underway on the new roads.

Rutter said he anticipates that the retail space will be the first part of the project to be built because the retail market is hot now. He said he has had expressions of interest from tenants who could fill about 100,000 square feet, and has a plan to put some retail underground, thus expanding from the 50,000 square feet that’s zoned now.

Rutter is confident that the residential portion of the project also will be built soon. His firm has done studies showing that apartments that are close to Metro will attract tenants quickly.

The office space, the biggest part of the project, could take longer because the market for new office space throughout the region has been dormant for years following drastic overbuilding in the 1980s.

Even for the offices, Rutter said, there have been some expressions of interest from possible tenants. “One thing we are is market-driven. We’re not going to build buildings without tenants,” he said.

Krasnow said the city is in no hurry. “We’ve always assumed this would take 10 years,” he said.

© Essex Capital, 2012