The City of Gaithersburg is seeking approval of a proposal that could reduce property taxes at the Lakeforest Mall site if a property owner invests in redeveloping the shopping center.
The County Council’s Planning, Housing and Economic Development Committee Monday afternoon is scheduled to consider a resolution to extend the “enterprise zone” in the city to include the mall property as well as two other nearby properties—The Toys ‘R’ Us and Burlington Coat Factory sites.
The city is asking the council to approve a resolution in support of their request to the state for a 10-year renewal of the Olde Town Enterprise Zone that would include the additional properties.
The city’s Olde Town area has been designated as an enterprise zone since 2008 but did not previously include the mall or other retail properties. Properties in the zones are eligible for a credit of 32.5 percent on any new property taxes generated during a 10-year period from any new investment or redevelopment.
This could be particularly helpful for the mall site, which was recently sold at an auction far below its assessed value. City officials have told Bethesda Beat that at least one developer—Annapolis-based Petrie Richardson Ventures—is interested in the property and others may be as well.
Tom Lonergan, Gaithersburg’s economic development director, told Bethesda Beat in February “it’s our understanding” that Petrie Richardson had the mall under contract, although the deal hadn’t closed. On Friday, Lonergan said the situation hadn’t changed.
“There’s no new news on that,” he said.
Gaithersburg Mayor Jud Ashman wrote in an email Friday that he has met with Petrie Richardson “a few times” about the mall property but hasn’t heard from them in “some time.”
“We have no new info on the status of that property,” Ashman wrote. “The idea to expand the Enterprise Zone came from City staff, not from any developer. The idea is to create additional incentive for redevelopment in the future.”
A spokesperson for Petrie Richardson declined to comment on whether they had bought the mall or if they were trying to purchase the mall. The developer is responsible for overhauling the former City Place Mall in downtown Silver Spring and rebranding it as Ellsworth Place.
Lonergan said the state designation “offers real benefits” that a property owner could use to help revitalize or redevelop the mall as well as the retail corridor along N. Frederick Avenue (Route 355) in the city.
U.S Bank is currently listed as the owner of the mall, according to Maryland property records. It purchased the mall for $19.1 million in an August foreclosure auction after the previous owner, Five Mile Capital, stopped paying the bank for the note it held on the property. At the time, Five Mile owed about $80 million, according to The Washington Business Journal.
Gaithersburg officials have said the site would be an opportunity for a mixed-use redevelopment project, but there are roadblocks. For one, the department stores at the mall—JCPenney, Sears, Macy’s and Lord & Taylor—all own their buildings at the property, while the bank owns the main mall building, which houses about 160 stores. If a developer wanted to redo the whole site into a mixed-use town center it would likely have to purchase those department store buildings.
However, adding the property into the existing enterprise zone could add an incentive to redevelop it.
“I support Gaithersburg’s efforts in terms of the enterprise zone,” County Council member Nancy Floreen, who chairs the planning committee, said Friday. “I really applaud their efforts to get that mall and land back on track, however they choose to make that happen. It’s really important.”
The full County Council is scheduled to vote on the resolution April 3, the day after the Gaithersburg City Council is scheduled to vote to support the resolution, according to County Council agenda documents.