Reluctant Developer Moves James Run Forward
It may be fitting that attorney Robert Schulman’s office is located in the World Trade Center building in Baltimore. The building – the tallest, regular pentagonal structure in the world – was designed to appear to be rising out of the harbor from select vantage points and welcome visitors to Baltimore’s famed Inner Harbor. Similarly, James Run Corporate Campus, a new development Schulman is planning off I-95 at Exit 80 will be marketed as a signature destination and the “Gateway to Harford County.”
Schulman’s office is located on the 18th floor of the World Trade Center, with sweeping views of the city to the east and the Inner Harbor to the south. In private practice for over 30 years, he’s a managing partner at Schulman, Hershfield & Gilden, P.A., specializing in business law, civil litigation, real estate and criminal law.
He began his legal career as an attorney with the U.S. Department of Justice and Organized Crime Strike Force and served as an Assistant United States Attorney for five years before venturing out on his own. Honored with the “Super Lawyer” distinction from 2007-2012, Schulman has made his career in white-collar criminal defense, employment litigation, commercial law, real estate law and complex civil litigation. He has a reputation for taking on complex and contentious issues with adeptness and speed. Yet, his first admission when asked about his role as developer for the James Run Corporate Campus was, “It’s the hardest thing I’ve ever done.”
James Run Corporate Campus is Harford County’s most aggressive development project since the Boulevard at Box Hill. Schulman manages the development company on the project, albeit a reluctant one. “I was representing some clients who owned the property when they asked me to take over as developer. I had never done it before, but I agreed. It’s very hard.”
Previously home to Bren Mar Park, a recreation area and 9-hole golf course, the 111-acre site earmarked for James Run has been in limbo for over a decade. “I took my first meeting on this property in 2001,” recounts Joseph F. Snee, Jr., consultant attorney for the James Run Development Corporation, LLC. “My files for this project fill a room.”
“It’s the most ridiculous process trying to develop something,” laments Schulman. “I don’t know why anyone would want to do it. Nothing is easy and everyone wants to stop you along the way for some reason or another. There are a million moving parts, and it’s exhausting.”
The layers to the James Run project most certainly add to the complexity of its development. Original site plans called for a mix of Class-A office space and retail space reminiscent of the Avenue at White Marsh. But, as the economy started its downturn beginning in 2008 and the inventory of office space grew in anticipation of BRAC, invested parties began looking at alternative approaches. The current plan submitted for approvals and permits with the County includes 388 lodging house units, 350,000 square feet of retail and restaurants, and 540,000 square feet of office space.
Once the site work is completed, the first phase to “go vertical” will be the residential elements. Not apartments. Not townhouses. Not condos. Not hotels. The term is “lodging houses” and the requirements for their build-out are outlined in the zoning regulations for the property. “The mixed office zoning dictates that these can’t be your average residences,” explains Schulman. “This complex and these units must offer the amenities normally associated with high-end resort living. There is nothing like it in Harford County.”
The 388 units (seen above through renderings and mock-ups), will be spread out over eight buildings, each housing 40-54 units on three or four stories. Through secured lobbies, residents will have their choice of one, two- or three-bedroom models with free on-site parking. The units will have maple cabinetry, brushed nickel hardware, granite countertops, nine-foot ceilings, and full-size kitchen appliances and washers and dryers.
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Residents can choose to have the unit outfitted with all housewares, including linens, dishes, cookware and be fully furnished. Additional resort-like amenities include a swimming pool and clubhouse, complimentary bike rentals, on-site BBQ pavilions, fitness center, daily complimentary fruit, cookie and coffee service, and the availability of dry cleaning and car services. The business center in the clubhouse is wired for Internet and wireless connection and features a conference room, plasma TVs, computers and printers. Social elements of the residential complex include a fireside lounge, a billiards room, pedestrian walkways and planned social events.
“The closest thing by comparison are the luxury apartments at Riverside, and these will exceed those at every level,” says Kevin Carney, president of Thomas Builders, who built the Riverside apartment complex and has interest in building the residential portion of James Run.
Schulman says the lodging houses will be available for over-night stays, weekly rentals, monthly and longer. They will be especially appealing to shorter-term contract workers, visitors to APG, and looking ahead, employees attracted to the County’s efforts to bring in a University Research Park and other research and development tech companies. “This will enable the County to market the full package to companies looking at Harford County.”
The second phase of the James Run Corporate Campus will introduce the retail element. The site may be located right off an interstate, but the company leading this portion of the project is all about presentation, high profile and panache. The Peterson Companies, 30-year veterans of mixed-use real estate developments in Washington, D.C., and suburban Maryland, points to National Harbor and Downtown Silver Spring as hallmarks of what they can deliver.
“The Peterson Companies has an extensive track record of developing mixed-use projects throughout the region that reflect the needs of the communities they serve,” says Angela Sweeney, V.P. Corporate Marketing & Communications, Peterson Companies. “While no two projects are exactly alike, they all reflect our commitment to high quality architectural and landscape design and feature an impressive collection of retail and restaurant offerings.”
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Working with the 350,000 square feet reserved for retail and restaurants, Schulman, et al, are looking to the Peterson Companies to attract high-end brands and labels currently unavailable in Harford County.
“Right now, a shopper who lives or works in Harford County and is looking for a designer label shopping experience has to leave the county for places like Towson Town Center, Tysons Corner or National Harbor. Harford County offers a lot of choices, but nothing of this caliber,” promises Schulman.
Taylor Chess, President of Retail for Peterson Companies adds, “We believe James Run’s location at the intersection of I-95 and Creswell Road is ideally suited for a value-oriented center featuring designer brands at affordable prices along with complementary restaurants and lodging. We are marketing it as such. If the retail community agrees with us, we will commence construction when we have signed leases for 50 percent of the retail space.”
The current site plan calls for outlet type stores arranged in a cluster with parking around the perimeter. While it’s too early in the process to speculate on tenants, Schulman assures that the concept is to give the residents on site and from around the region a luxury-brand destination.
With whole office buildings currently sitting empty in and around Aberdeen and APG, additional office space will be the last portion added. Schulman explains that the original plans envisioned a large retail center, a hotel and over a million square feet of office space in several towers. While monitoring the market, Schulman started noticing that contractors were only opening satellite offices instead of wholly relocating, contributing to the oversupply and increased vacancies. Sequestration only cemented that approach, he adds. He is confident, however, that the office space demand and defense contractors are coming, but beyond that he sees more potential. “The location off 95 allows for consolidation of headquarters for East Coast companies operating between New York and Florida. Medical. Pharmaceutical. Academia. We’re not just going to concentrate on leasing to defense or government contractors. There’s more potential here than just that.”
The space allocated for office was reduced to 540,000 square feet over three buildings. Schulman believes that the biggest differentiator between the James Run Class A space and other Class A space on the market – current or potential – will be the presence and synergy of the retail and residential (seen below on the site plan). “It will be unmatched in the market.” At press time, the leasing agent for the office space had not been named.
TAX INCREMENT FINANCING
While James Run promises to give Harford County a taste of the high-life in a contemporary combination of ‘Rodeo Drive’ retail, resort residential and walk to work offices, perhaps the most unique thing about the project for area citizens is the tax increment financing – or TIF.
First introduced in California in 1952 as a method to use future gains in taxes on an improved property to subsidize portions of those said improvements, the TIF has had its share of failures and successes, proponents and naysayers over the years. All 50 states have TIFs on the books, and Maryland can point to about 10 examples of using it, including the public infrastructure for Arundel Mills, the National Business Park near Fort Meade and National Harbor in Prince George’s County. In Harford County, the only other time a TIF has been approved was for the proposed residential development, Beechtree Estates, in partnership with Clark Turner in 2010.
“Since the collapse of Lehman Bros. in 2008 and the subsequent real estate downturn, it’s been nearly impossible for anything to be developed with conventional commercial real estate lending,” says Snee. “The commercial banks just aren’t leading, and without some sort of help with the financing, nothing would get developed.”
Harford County council approved the TIF for James Run voting 4 to 3 in favor over two sessions in November 2012 and April 2013. The County will act as a conduit for the financing, Snee explains, helping to secure $23 million in special obligations bonds to fund infrastructure improvements to the parcel including onsite water, water tanks, sewers and road improvements. “Several intersections in the area close to the project are currently failing, and neither the County nor the State has the money to fix them. They will get remedied at no cost to the taxpayer,” Snee assures.
“It’s basically public/private partnership, and it guarantees that not one penny of TIF proceeds can be used for anything other than the public improvements. As the developer, I don’t get any money. Escrow agents will hold the money raised and only approve and pay bills for the improvement,” Schulman adds.
To help get a better understanding of how tax increment financing works, take a look at the graph below.
In this illustration, $69,228 is the “Project Area’s Base EAV.” That’s the amount the James Run Development Corporation, LLC as property owners currently pay in annual real estate taxes for the unimproved property. Over the course of the TIF, and as improvements to the property positively impact the assessed value and therefore the taxes, that increment is used to pay down the debt service on the bonds. During that time, the County continues to receive the $69,228 payments – and any revenue above the allocated increment – while also benefiting from the roadwork improvements, intersection upgrades and employment wages. When the TIF expires, the County reverts to receiving all assessed taxes due on the fully improved site. In the first three years of the project, there will be a shortfall in tax increment revenue in paying the bond’s debt service, but the County will impose a special tax on the property owners so that the debt service can be paid. It is estimated that beginning in 2018, the County will begin seeing regular tax revenue coming in and the special tax will no longer be needed.
Snee’s firm, Snee, Mahoney, Lutche & Helmlinger, P.A., led the TIF efforts for the developer and will continue to provide legal services through the construction phases. “This process has taken a long time and is extremely complicated,” shares Snee, “but we’re proud of the work we did here, and we’re excited to see the project come to life.”
Aside from access to Louis Vuitton handbags and on-site dry cleaning services, what can Harford County citizens expect to see as a benefit from James Run to their community?
“The County Executive, the Office of Economic Development, everyone in Harford County has been great to work with,” shares Schulman. “They are all smart, professional and committed people. They worked to help get this project off the ground and the economic benefit to the County will be worth it.” I95