When Canadian Erkki Pukonen toured Montgomery County several years ago to scout a location for a multimillion-dollar office center, he wondered why builders had overlooked the most obvious sites for development: prime chunks of land near the Metro station in downtown Silver Spring.
"With the exception of one major project, the whole area was dormant, in the doldrums," Pukonen said recently from the Toronto headquarters of Caruscan Corp., an international development company. "The market had not been proven at all."
This fall, if all goes according to Pukonen's plan, Caruscan will start construction of a $70 million office-retail complex that Montgomery County planners, developers and local merchants hope will spark the downtown revitalization they have long envisioned.
"This is a special project: an urban environment in suburban Maryland," said Herbert A. Palm, a manager for Shannon & Luchs Realtors, which has lined up two major tenants for the 660,000-square-foot complex of offices, restaurants and shops at the intersection of Colesville Road and Second Avenue.
By Silver Spring standards, Metro Plaza certainly is ambitious, say county planning officials and those familiar with the project. Caruscan's plans call for 10-story triangular building and a neighboring 16-story trapezoid, separated by tree-lined terraces and a waterfall near the northern entrance to Metro's Silver Spring station. The complex would be built on the two-acre site of the old Perry Hardware store, which the Canadian firm holds an option to buy.
Caruscan is banking on more than Metro Plaza's prime location--which is within easy reach of the District, Montgomery's commerical corridors and the beltway--to sell space in the complex. With rents competitively priced at $21 per square foot, Caruscan also is counting on easing an office space shortage it predicts the county will begin to feel in the next year, officials said.
"We're no longer in the soft office market we had in late 1981 and early '82," said Palm, the regional manager for Shannon & Luchs' commercial leasing division. "By the end of this year, office space will be tight in Montgomery County. Metro Plaza will fill that need."
Palm and Pukonen point to developer Lloyd W. Moore's office building at 1100 Wayne Avenue, which dominates a hill two blocks from the subway station. More than half of the 134,000-square-foot building--the first new office structure there in 10 years--is leased. And that bodes well for Caruscan, Pukonen said.
"Lloyd Moore is asking $19 per square foot and in Bethesda, office space is going for $25 to $29," said Pukonen, a Caruscan vice president. "We think our extra features will sell the building. The location is just ideal . . . for a small, urban core in Silver Spring."
Caruscan--the name comes from its operations in the Caribbean, the United States and Canada--is a publicly traded firm that last year reported about $50 million in assets. The corporation has built condominiums on the island of Montserrat; a residential community in North Palm Beach, Fla.; luxury housing in Phoenix, and Gateway Centre, a $30 million commercial complex near Toronto. Recently, Pukonen oversaw the completion of the $10 million Datacrown Inc. building on Columbia Pike in Silver Spring.
Caruscan is now negotiating with several lenders for a construction and financing package for both phases of Metro Plaza, said Pukonen, who declined to discuss the loan. He said he was confident the firm will secure enough tenants to obtain the financing.
Pukonen and others said 30 to 50 percent occupancy in the first phase of Metro Plaza--the 184,000-square foot triangle bordering Colesville Road--would virtually guarantee construction of both Metro Plaza buildings. A "major" law firm and an accounting company have signed pre-lease agreements for Phase One, while a third corporation has expressed an interest in 400,000 square feet of the 476,000-square-foot Phase Two building, officials said.
Despite rosy predictions about suburban office space, Metro Plaza planners did acknowledge that it could be a while before the giant complex is fully leased. "It might take three to four years to fill up both buildings," said David D. Freishtat, a Silver Spring lawyer who has represented Caruscan. "The linchpin for the project is the first building."
"If that is leased, then we'll build both," Freishtat said.
County planners said the construction and leasing of both buildings will go far towards reviving the core of Silver Spring, an ever-changing mosaic of small shops, gas stations and ethnic restaurants that has yet to capture significant numbers of commuters and area residents.
"Investment in Silver Spring has picked up some," said Duc Duong, the assistant director of the county's economic development office, "but this project is going to accelerate that revitalization.
"A lot of folks have doubts about building projects of this size near Metro stations," Duong said, "but I personally believe the Caruscan project is going to be constructed."
"If it is built, it would certainly be one of the most visible things in the area, a key project for Silver Spring," said William Barron, a county planner. "It has received all the necessary approvals from the county except a building permit. We're waiting for the shovels to appear."
In January 1982, Caruscan won an optional-method permit from the county planning board which, in return for providing public amenities, enabled the Canadians to double the density at the downtown site.
A site plan for the project was approved three months later, but expires this September, forcing Caruscan to scramble for tenants in the smaller building.
If construction begins late this summer or in early fall, the smaller Metro Plaza building could be ready for occupancy by early 1985, Caruscan officials said. Construction of the larger building would be finished a year later.
One wrinkle in the timetable is the nature of the site itself, said Pukonen. Extensive borings revealed a thick bed of rock over much of the site, which Caruscan will have to remove with sophisticated "scraping," Pukonen said.
"Fortunately, there's a bit of a natural bowl in the rock--so we won't have to do any blasting," he said.