2020 | Business

UPDATED: Amazon proposing $92 million distribution center in Gaithersburg

Company won’t confirm plans; Property owner urges city to act quickly or risk losing project

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Amazon has approached Frederick-based Matan Companies about putting a distribution center in Gaithersburg

From Gaithersburg planning documents

Amazon wants to open a distribution center on the former Leidos site in Gaithersburg, according to a site plan posted by the city. It is described as a $92 million project that would create 850 jobs.

Frederick-based Matan Companies bought the 44-acre campus, near the interchange with Interstate 270 and Montgomery Village Avenue, in January 2019. It was formerly occupied by IBM and Leidos. It is next to a FedEx distribution facility.

In an April 27 email to city officials, Matan Managing Partner Mark Matan urged Gaithersburg to take action to save the project, which could be at risk of being lost. He refers to the city attorney’s contention that a site plan and a sketch plan are not substantially the same. Therefore, the sketch plan has to be revised and approved, then a site plan has to be resubmitted for approval.

He wrote that “after 3 months of trying,” Amazon is still not getting what it needs to build, “thus putting the entire project and accompanying jobs in jeopardy.”

John Schlichting, the city’s director of planning and code administration, said in an interview on Monday that Matan submitted a sketch plan for the property in May 2019 and the mayor and council approved it in August of that year.

The next step of the planning process after a sketch plan, Schlichting said, is a schematic development plan, or SDP, which is a preliminary site plan.

“One of the criteria for that [Matan’s] sketch plan was that when the SDP came in, it had to include multiple buildings and multiple uses,” he said.

But Schlichting said Matan later filed an SDP for a single use in a single building.

“[The city’s planning staff] made the determination that the SDP that they filed was not in conformance with the sketch plan, because of that criteria that it needed to include multiple buildings and multiple uses,” Schlichting said.

Matan on Friday filed a new sketch plan, Schlichting said, that removes the “multiple buildings and multiple uses” criteria.

The mayor and council, along with the city’s planning commission will hold a joint public hearing to discuss the new sketch plan “as soon as possible,” Schlichting said. After that, the planning commission will make a recommendation to the council, which has final approval.

If the new sketch plan were approved, the project would then move to the schematic development plan phase, then the final site plan phase.

Economic benefits of Amazon for Gaithersburg debated

A source familiar with the Amazon proposal told Bethesda Beat that current zoning for the site wouldn’t allow Amazon to build and operate a distribution center.

“The current proposal by Matan is not what the city envisioned for this site,” the source added. “The city envisioned higher density, with higher-paying jobs and mixed use.”

“To be fair to the city,” the source continued, “if you go back 10 or 15 years, those two sites were IBM and Leidos with high-quality jobs. The city’s perspective is that it’s not outside the realm of possibility that the city could attract companies [for the site] that would have more of an economic impact.”

City Council member Neil Harris posted on Facebook Monday night that Matan’s original proposal included the headquarters for a biotechnology company mixed in with retail. He wrote that because the proposal had recently been amended and resubmitted, he couldn’t discuss details further.

Stephen Fuller, a regional economist and founder of the Stephen S. Fuller Institute at George Mason University in Northern Virginia, said in an interview Tuesday morning that an Amazon distribution center could benefit local businesses in Gaithersburg and generate “spinoff” economic activity.

“Generally, these types of distribution centers appear to be the future, and the jobs they generate are skilled jobs. They’re jobs that serve a need in the economy, so I see them as additive to other kinds of economic activities that are growing in the Gaithersburg area,” he wrote.

The other factor to consider, however, Fuller said, is whether a better alternative is available for the site.

“The question is, what does it [Amazon] displace? Gaithersburg is a growing area and it’s going to attract other kinds of investments. So when you put a big warehouse structure or a facility that needs a lot of space, what else might have gone there that might have been better for the region?” he said.

Because of the economic downturn from the coronavirus pandemic, Fuller said the benefits of the distribution center might not be felt until 2022.

“This is gonna worry us for a while, and that’s gonna affect consumer and business behavior,” he said.

But Fuller said that with more people using online shopping both before and during the pandemic, the Amazon model will “clearly be more prevalent going forward.”

Site plan, overview give details of the project

In his email to the city, Matan refers to the company that would build the distribution center as “PS.” That’s an apparent reference to “Project Summit – Amazon,” which is in the subject line of the email. He also refers in the email to “The number one company on the planet.”

A site plan and overview are attached to the email and describe what Amazon has in mind for the site.

The site plan and overview are marked confidential and have multiple references to Amazon using the property, including the company’s logo on a proposed building.

They say the company wants to create a $92 million “last-mile facility,” or distribution center where packages go before they are delivered to customers. It would operate 24 hours a day.

The center would create up to 850 jobs, according to the documents. The jobs would include:
• 300 full-time and part-time employees to handle “seasonal demands”
• 400 full-time jobs created through a third-party delivery program
• 150 “FLEX Drivers,” in which workers could use their own vehicles to deliver packages

Amazon spokeswoman Rachael Lighty wrote in an email on Tuesday that the company doesn’t comment on any “specific operations plans in Maryland,” but encouraged people to “stay tuned.”

The real estate development publication Montgomery Newsletter reported in its edition released on Monday that Amazon is interested in the former Leidos site, but its story did not have many details of the project and did not get into the back-and-forth between Matan and the city.

Reached by phone on Monday, Mark Matan declined to comment.

Gaithersburg Mayor Jud Ashman referred questions to Assistant City Manager Tom Lonergan, who would not confirm that Matan and Amazon were working on the project, calling it a “private matter.”

“All that I have confirmation of is that they [Matan] are planning to submit a revised sketch plan. But as for the tenant, that would really be for Matan to comment on,” he said.

Matan wrote in his email to the city that his company originally submitted a sketch plan for 650,000 square feet of commercial/employment space and up to 65,000 square feet of retail space.

He wrote that “PS” later approached the company with the proposal to build the distribution center and sent its global director of economic development to meet with the city’s staff.

“The message delivered was simple: the immediate need is a state of the art delivery station requiring the entire site, but PS will continue to grow their presence in the DMV, and they currently have no real home in Montgomery County,” he wrote.

Matan wrote that the need to revise a sketch plan and get approval from the city could lead to a delay in the delivery date and “create substantial issues for PS.”

“PS has told me that the schedule/solution is not satisfactory, thus putting the entire project and accompanying jobs in jeopardy. My request is for the City’s elected officials to instruct your staff to provide PS a satisfactory solution right away,” Matan wrote.

Matan also wrote that the number and quality of jobs was different than what Gaithersburg officials were expecting.

He proposed that city officials “run the sketch plan revision and site plan simultaneously” because of the time sensitivity of the project. “I understand that this was done for the Carmax site and makes sense in this case given the enormity of the economic impact and the sensitivity to time by PS,” he wrote.

He also suggested a commitment to “fast track” the permitting process.

Dan Schere can be reached at daniel.schere@bethesdamagazine.com