When the Montgomery County Council gave the green light to the White Oak Life Sciences Center last summer, it was a partnership. The county and a private developer would share the risk — and possible future profits — in the creation of a new town center that would provide jobs and amenities in Montgomery’s economically isolated eastern sector.
The final agreement, struck last month by County Executive Isiah Leggett (D) and developer Percontee, is quite different. Gone is the partnership, replaced by a complex land sale that will convey county-owned land to Percontee at what appears to be a bargain price.
Leggett, who has spent years pursuing the project, said the unusual structure of the deal reflects the difficulty of jump-starting the economy in a part of the county that has had little to no job growth for decades.
“You could come up with maybe a better deal on paper,” he said. “It would stay on paper, and you’ll never get anything developed.”
But there is some skepticism on the council, which must decide whether the revised accord is a good deal for taxpayers.
“I don’t think we know yet,” said council member Roger Berliner (D-Potomac-Bethesda), who wants the council to hire an outside real estate adviser to scrutinize the transaction.
Though council members have no authority over the terms of the sale, they must approve $40 million in road improvements and other infrastructure near the site for the project to go forward. Among other things, lawmakers say they are concerned about how much money the county will get for the land and how much of the deal was negotiated behind closed doors.
Council member George L. Leventhal (D-At Large) called the agreement “a leap of faith” with “a lot of unknowns.”
The county envisions White Oak as a hub for medical and life-sciences companies, drawn to the site by its proximity to the Food and Drug Administration campus near Route 29 and New Hampshire Avenue. It would be augmented by housing, shopping and dining. The hope is that the combination of the FDA, the life-sciences firms and the new Washington Adventist Hospital being built nearby will generate as many as 10,000 jobs over 25 years.
The economic activity could be transformative for an area that includes both prosperous residential communities and some of the county’s highest-poverty census tracts. While investment and jobs have flowed to places such as Silver Spring and Bethesda in recent years, several factors — inadequate roads, lack of public transportation and a mostly departed generation of political leaders who sought to maintain the east county’s semi-rural character — kept the area around White Oak in a kind of economic stasis.
Leggett, who lives in the east county community of Burtonsville, has pursued the life-sciences project from his earliest days as county executive. With the end of his third and likely final term in sight, an added sense of legacy seems to be motivating him.
In 2007, he negotiated the $10 million purchase of 115 acres next to the FDA from the Washington Suburban Sanitary Commission (WSSC), which had used the site on Industrial Parkway for sludge composting. After a deal with another developer collapsed, the county looked to an adjoining land owner, Percontee, which was operating a sand and gravel quarry on 180 acres.
“My view is that the people in the east part of the county have been waiting for something positive to happen,” Leggett said in an interview, tapping his office conference table for emphasis. “We have a county executive from the east part of the county who has made it a goal and objective to change this.”
Percontee is owned by the Gudelsky family, a major player in regional real estate and philanthropy. Leggett’s relationship with the family dates to the mid-1980s, when he served on the board of the Maryland College of Art and Design with Martha Gudelsky, mother of the company president, John Gudelsky. She helped Leggett make important contacts during his first campaign for County Council in 1986.
Since then, the Gudelskys have contributed tens of thousands of dollars to Leggett and other elected officials. Leggett says the contributions were never a factor in his collaboration with Percontee.
The partnership shifted to a land sale earlier this year after county attorneys discovered that Percontee’s land came with covenants — negotiated in the 1950s and ’60s with surrounding property owners — that place limits on what can be built there. Percontee’s executive vice president, Jonathan Genn, the company’s lead negotiator, said in April that he did not mention the covenants earlier in the process because he did not consider them an urgent issue.
Genn’s omission infuriated some senior officials in the county’s executive branch, who felt that it made him an untrustworthy business partner. Privately — to avoid contradicting their boss in public — those officials said it seemed that only Leggett’s long relationship with the Gudelskys kept the deal alive.
Leggett scoffed at that assessment. Genn declined to comment.
Leggett said he became leery of co-owning land that could be the subject of lawsuits from nearby property owners who wanted the covenants to remain in force. For that reason and others, he said, the parties converted the project to a purchase of the county’s land by Percontee, but with a few twists.
The county site is appraised at $42 million, but Percontee is required to put up $10 million — the amount that the county paid WSSC to acquire it. The company has agreed to secure a $32 million line of credit based on the remaining value of the property. That amount can be reduced, according to a negotiated formula, as Percontee pays for roads, school and transportation impact taxes and other key elements of the project.
To incentivize Percontee to move quickly, the agreement says that whatever remains of the $32 million line of credit after 10 years would go to the county.
Some council members remain skeptical that the county is getting enough from the deal, or they worry that many of the terms were hammered out in private. Some sessions with Percontee representatives were handled by Leggett alone, without county attorneys or chief administrative officer Tim Firestine present. Leggett also met privately with John Gudelsky.
“Too much of the conversation about this has been in private meetings,” Leventhal said.
Council member Marc Elrich (D-At Large) said he was “not at the ‘happy camper’ stage yet. I’m worried we gave away too much for too little.”
Montgomery officials said the potentially most valuable element of the deal is within their control. The county is setting aside 20 acres of its own land to accommodate a potential expansion of the FDA campus, something the federal agency has long discussed.
The original partnership would have placed the FDA on land owned jointly by the county and Percontee. But that plan changed because of legal concerns about the convenants on Percontee’s piece of the site.
Under the revised agreement, a private developer would finance the buildings on the county-owned land and receive lease payments for 20 years. After that, the rental revenue would revert to the county.
The council is expected to scrutinize the agreement over the summer and into September before taking final action. Council President Nancy Floreen (D-At Large) said in an interview that it all “looked very promising” and that the county is better off not in a real estate partnership.
“This is not our line of work — development,” she said.