Develop Here – But Not There?
by Mark Arend
Baltimore is the location of two new headquarters projects – one involving construction of a new waterfront office complex for Constellation Energy Group, which is merging with Chicago-based Exelon, and one the expansion of Under Armour’s headquarters in the Locust Point area.

In early February, Exelon and Constellation announced the developer, site and design firms for their new headquarters building in downtown Baltimore, contingent on the completion of the companies’ proposed merger, which is expected to be finalized this spring.

The Maryland Public Service Commission approved the merger on February 17th. The proposed transaction has been approved by shareholders of Exelon and Constellation. Required regulatory approvals or reviews have been completed by the New York Public Service Commission, the Public Utility Commission of Texas, the Department of Justice, and the Nuclear Regulatory Commission.

The merger also requires regulatory approval by the Federal Energy Regulatory Commission.

Exelon conditionally selected Harbor East Development Group, LLC, as the developer for the proposed headquarters to be located at Harbor Point between Fells Point and Harbor East in Baltimore, in a to-be-constructed building.

The award is contingent on Exelon and the developer reaching an agreement on lease terms and other conditions.

“We are excited to move forward with our plans to build a new Baltimore headquarters facility, bringing significant benefits to the City of Baltimore, including additional jobs and tax revenue,” said Exelon President and COO Christopher M. Crane in a press release. “We are committed to Baltimore’s downtown and its business district, and we look forward to being a growing part of the Baltimore community as the overall vitality of the city’s downtown continues to flourish.”

The selected developer was evaluated and consequently selected based on criteria that included their capabilities and experience and their proposed competitive and economic lease terms.

Additional site selection parameters included proximity to the downtown waterfront, the ability to accommodate 300,000 to 370,000 rentable sq. ft. (27,870 to 34,373 sq. m.), a trading floor size of at least 70,000 sq. ft. (6,503 sq. m.), office floor size of approximately 30,000 sq. ft. (2,787 sq. m.) and availability for occupancy in 2014.

“It was clear from our first discussion with Exelon that they wanted a unique headquarters facility that would create a dynamic home for their growing Baltimore work force,” said Michael S. Beatty, president, Harbor East Development Group, LLC. “When people visit this site in three years they will realize just how committed Exelon and Constellation are to not only their employees but to the greater community and the environment. This project will be a model catalyst for the development of a truly sustainable and vibrant neighborhood.”

Just how “downtown” the site is, is a matter of debate among some, who consider the location on the edge of Baltimore’s waterfront district to be a bit of a stretch from the central business district. But suitable space for the new headquarters project was not available in the CBD, company officials maintain, and the location will enable the company to build from scratch a signature building that will make a statement and implement Leadership in Energy and Environmental Design (LEED) features from the outset.

There are significant benefits to the City of Baltimore based on the selected location. Development of the building is expected to create more than 1,000 construction and other jobs and provide new tax revenue for the city.

Construction of the new building was a commitment made as part of the companies’ merger settlement with the State of Maryland, the Maryland Energy Administration, the City of Baltimore and the Baltimore Building and Construction Trades Council announced Dec. 15.

Under the settlement, Exelon, Constellation and BGE will provide a package of benefits totaling more than $1 billion and expected to create more than 6,000 jobs in Maryland (including the 1,000 jobs related to the building).

Meanwhile, Under Armour in January gained support for its proposed headquarters campus expansion at Tide Point from the Locust Point Civic Association of homeowners, a move that was not required for the expansion to proceed, but was nonetheless welcome. The sportswear and equipment company agreed to neighborhood improvements and enhanced support of community events and facilities.

Central Planning
On another more statewide front, a controversial development blueprint called PlanMaryland is being floated by the governor’s office as a way to curb sprawl and sustainably manage economic development in rural parts of the state.

Maryland needs the plan to better manage the 560,000 acres (226,800 hectares) of projected growth in the next 18 years, the O’Malley Administration maintains, for these reasons: (1) to encourage sustainable development and protect quality of life; (2) to develop land at a pace consistent with growth in population and housing; (3) to preserve the state’s natural, historical and cultural resources; (4) to strengthen existing cities and communities and reduce tax burdens; (5) to protect farmland; (6) to reduce automobile dependency; (7) to increase access to transit options; (8) to concentrate jobs in existing cities and communities, strengthening economic development; (9) to increase housing affordability; and (10) to minimize residential land consumption outside of existing communities.

Specifics as to how PlanMaryland would be implemented and enforced are being worked out. But it’s not being well received by areas hoping to attract economic development from companies seeking a non-urban location.

“It is an attempt by the State of Maryland to focus development around existing transportation, particularly mass transit and smart growth areas,” says Perry Berman, a real estate agent at Scheer Partners, a Rockville, Md.-based full-service commercial real estate firm, and 30-year veteran of the Maryland National Capital Park and Planning Commission.

In December, Scheer Partners negotiated a nearly 40,000-sq.-ft. (3,700-sq.-m.) lease for JDA Software Group at the DANAC Stiles corporate campus in Rockville, in Montgomery County, where it has been a tenant for the past five years, since its acquisition of Manugistics Group, a provider of synchronized revenue management and supply-chain solutions. Earlier that month, Scheer Partners worked with Novavax Inc., a clinical-stage biopharmaceutical company, in securing 74,000 sq. ft. (6,900 sq. m.) of lab, manufacturing and office space in Gaithersburg.

“This plan is not being well received by the rural counties, who see it as an attempt by the state to control their land use, which traditionally has been a local prerogative,” says Berman. Previous state plans only permitted the state to comment on such matters, but PlanMaryland suggests a more proactive role in the location of state facilities and state funding, he explains, adding that all residential, commercial and industrial land usage would be scrutinized.

“Rural parts of the state have concerns about their own financial situations and growth and businesses, and many of them have already established plans for development, particularly large-lot housing. The state is saying it wants to end that kind of growth or sprawl.”

Should potential investors in Maryland’s non-urban locations take notice?

“Yes, it should give them pause,” Berman states. “It’s up to the state legislature to enact this, and it’s not clear what they will do at this point. But this will be one of the major issues in the legislature’s discussions this year.”

County associations, chambers of commerce, builders and environmental groups all are weighing in. “This is a big deal, especially with respect to the business climate. Maryland has been perceived as being not as business friendly as, say, Virginia. Whether it’s reality or not, once something like this gets approved, the perception is there, which has as much power as anything else.”

Some counties will likely support the plan, says Berman, such as Baltimore and Montgomery Counties, which maintain their land-use planning is already based on premises like those in PlanMaryland. But how those areas’ legislators will act remains to be seen.

“It’s a very interesting tradeoff. From a philosophical point of view, you would think that clusters and growth and development around existing public transit is the way to go, and we should preserve the rural areas. Unless you’re in a rural area. They might not want to be preserved. Frederick and Anne Arundel Counties’ land use is mixed. What’s included in the plan and what’s not? How do the lines get drawn? Who’s in charge? What are the standards? Who determines what’s right? The counties should determine that, and under this plan, it’s the State of Maryland. It’s easy to talk about values in the absolute, but when you try to apply them, someone will get hurt.”