Federal Realty involved in town center project

Federal Realty Investment Trust is embarking on a major new urban development — a year and a half after announcing that it was moving away from “main street” communities in favor of conventional projects. The new urban project, called Rockville Town Square, includes 651 residential units, 170,000 square feet of retail, at least 370,000 square feet of offices, and significant civic space on about 15 acres. The $300 million project, scheduled to be completed in 2006, is the “grayfield” redevelopment of a mall in the heart of this city north of the District of Columbia. Federal Realty, a real estate investment trust with assets of about $1.9 billion, was one of the largest firms in the New Urbanism until 2002. Rockville Town Square does not represent a shift in strategy for Federal Realty, according to company spokesperson Kristine Warner. Federal is involved in Rockville Town Square because it owns part of the site — a shopping center that is being torn down — and because the project is a public-private partnership, which reduces the company’s risk. Federal has a $30 million stake in Rockville Town Square. Other players include the city, the county, and two other developers — Danac Corp. and Ross Development. “If it makes sense, we will get involved in a project like this,” Warner says. “What we won’t do is do what we did in Santana Row — which is to demolish a 42-acre shopping center and build a town center from scratch.” The $445 million Santana Row in San Jose, California, was too complicated and risky, Federal officials say — and it ultimately caused the company to move away from New Urbanism. However, Federal recently stated that Santana Row is turning around from a shaky beginning that included a $90 million fire. “Phase II of Santana Row, which was 95 percent preleased to Best Buy and the Container Store, is coming on line ahead of schedule, under budget, and above our projected returns,” says CEO Donald Wood. The company recently announced plans to rebuild the building destroyed by fire and complete Santana Row. A new downtown for Rockville Rockville Town Square represents a major turnaround for the city with close to 50,000 people. In what the Washington Post describes as a “misguided attempt at renewal, the city allowed a fortress-like mall to be built in the 1970s, and downtown never really recovered.” There is little left of the small downtown that thrived 50 years ago. The town square will be a new downtown, and will include civic buildings like a cultural arts center and a new library. The site is located a short walk from a DC Metro station. The city and county contribution will be $98 million, which includes $21 million for the library. The rest is for parking garages and streetscapes. The project is expected to generate $4.7 million in annual tax revenues by 2008, which, in addition to parking fees, will more than cover long-term capital costs, planners say. The project was master planned by Street-Works. Groundbreaking is anticipated in the spring of 2004.