Slow progress on prime Bethesda real estate
Several proposals for luxury residences, retail falter
For much of the past decade, developers dreamed up big plans for a wooded 52 acres across from Bethesda's Walter Johnson High School.
The first plans came in 2004 and would have brought two luxury apartment towers with more than 700 apartment units. The plans expanded to include a 157-room hotel, a 90,000-square-foot "wellness center" with a spa, and the apartments became luxury condominiums in separate high-rise buildings, with high-end retail and restaurants and office space.
Situated next to Old Georgetown Road and Interstate 270, the development at Rock Spring Centre in North Bethesda could have had high visibility and a big impact on the surrounding community.
Instead, the proposals imploded. All that remains is a lawsuit, and its outcome, unlike the high-rises, is up in the air. A development plan for retail, a hotel and residences from a different group was submitted in 2008, but the slow economy has stalled that as well.
No construction, no profits leads to lawsuit
The Penrose Group, the developer that sought approvals in 2004 and also developed King Farm in Rockville, recently won a $36 million suit against for breach of contract against the Camalier and Davis families who own the 52 acres. In a verdict reached March 11, a jury in Montgomery County Circuit Court agreed with Penrose's contention that it should be awarded incurred costs and unrealized profits it would have obtained from operating two luxury apartment buildings, because the families refused to sign legal documents to Penrose that would have allowed construction.
Penrose also claimed that due to the families' actions, it lost $112 million in project financing and construction loans.
The development is on approximately 5.5 acres of vacant land between Rock Forest and Rock Spring drives east of Old Georgetown Road in Bethesda. The land where the two towers were to be built is part of the larger 52-acre property owned by the Camalier and Davis families.
"I think it represents my client's vindication that the court system requires the defendants to do the right thing, to live up to their deal, to not turn their back on the contractual commitments they made," said Brian Schwalb, the attorney for Penrose at Venable law firm with offices in Rockville.
The families contend that that Penrose's profit projections were unrealistic, and that the case's proceeding was "riddled" with mistakes, according to Dale Cooter, of the Cooter, Mangold, Deckelbaum and Karas law firm in Washington, D.C., who represented the Camalier and Davis families.
"The reality is that had this project gone forward, it would have produced no profits, but rather substantial losses. In the face of that reality, the jury should not have been able to award any damages, not even one dollar," Cooter said.
Cooter said he plans to challenge the verdict.
A $1 billion project falls short
The fate of the development and property is unclear.
Penrose reached an agreement on the 5.5 acres with the Camalier and Davis families in 2004 to build, own and operate the two apartment buildings, which together would have contained 703 units. Penrose would be leasing the land from the families. The Planning Board approved the towers in 2003 and 2004.
By 2005, Penrose was in discussions with Canyon Ranch, a resort spa company with facilities in Las Vegas, Arizona and Florida, to create a $1 billion development that covered a much larger portion of the 52 acres, including the hotel, luxury condominiums, spa and retail. Penrose would have leased 48 acres on the property from Camalier and Davis families and developed the property with Canyon Ranch.
By 2006, the Montgomery County Planning Board had approved a hotel and two 20-story condominiums units intended to replace the two original apartment units. But the plans stalled, in part due to new regulatory requirements from the county, and in 2006 the Canyon Ranch project with Penrose fell through.
"Canyon Ranch never went forward because it just died," said Robert Kronenberg, a planner with the Maryland-National Capital Park and Planning Commission.
Penrose's development plans reverted to the high rises that were approved in 2003 and 2004. Then, in November 2006, Penrose alleged that beginning the month before, the two families deliberately withheld certificates that Penrose needed to build the towers.
Due to the families' delays, Schwalb said, Northwestern Mutual Life's funding for the project disappeared, effectively killing the project.
"They put into play a strategy to try to get the land back," Schwalb said of Camalier and Davis. "I think it was a shrewd, calculated, business decision to try to allege that there were defaults, throw the process into dispute and litigation, knowing that a lot of things can happen."
Camalier and Davis alleged that Penrose was in breach of the original ground lease. Cooter maintained that the families were within their rights by withholding and raising objections over the certificates.
"The actions of the Camalier and Davis families in connection with these ground leases were not taken in a quest to take away anything of value from Penrose," Cooter said.
The two parcels slated for the two apartments sit vacant. Although Penrose has not been paying rent on the two properties, Cooter said, Camalier and Davis have not made any effort to terminate the leases.
At Rock Spring Centre,
hope springs eternal
Despite the years of false starts, however, the 52-acre site is not dormant. In 2008, DRI Development Services, based in Washington, D.C., submitted new site plans for high-rise residential towers, a hotel, and retail development at the Rock Spring Centre property.
A representative for DRI declined to comment on the company's proposals for Rock Spring Centre.
Kronenberg said after some progress, those plans stalled as well due to the faltering economy, although within the last month he said some discussions between DRI and the Planning Department have resumed about issues related to the site.
"I think they're going to be resubmitting plans," Kronenberg said.