The owners of the White Flint Mall property—Lerner Enterprises and The Tower Cos.—are weighing what to do next after losing their court appeal Tuesday in the Lord & Taylor case.
Three judges from the Fourth Circuit Court of Appeals in Richmond upheld a federal District Court’s August 2015 verdict to grant Lord & Taylor $31 million, ending the developers’ latest appeal in the breach of contract case.
It’s not yet clear how the latest court decision will impact the property owners’ plan to redevelop the former mall site on Rockville Pike into a mixed-use town center. The mall was demolished last year and now only the building housing Lord & Taylor, which shared a wall with the former mall building, remains. The store continues to operate at the site.
“Obviously we are disappointed with the decision,” Scott Morrison, the trial attorney who represented the property owners, said in an email Tuesday. “We are evaluating our options, which will take time. Until we complete our analysis, we will not make any final decisions with respect to further appeals.”
The developers have 90 days to file an appeal to the U.S. Supreme Court and 14 days to file for a Court of Appeals rehearing, according to court documents.
Morrison noted the property owners won’t have to pay the $31 million to Lord & Taylor until the judgment is finalized.
Lord & Taylor issued a statement Tuesday expressing its support of the appeals court’s decision.
“We are pleased that the Fourth Circuit Court of Appeals unanimously affirmed the jury’s decision in favor of Lord & Taylor, and we remain grateful to the community for continuing to support our store,” the statement says.
A concept plan for the first phase of redevelopment for the former White Flint Mall site that was included in court documents. (click to expand) Lord & Taylor is building K in the plan.
In 2015, after the district court jury handed down the $31 million verdict in favor of Lord & Taylor, Morrison said the cost would “impose a very onerous financial burden” on the developers and that the redevelopment would be “unlikely to occur” unless the judgment was reversed.
Attorneys for Lord & Taylor, however, responded at that time by saying that during the district court trial, the property owners presented a revised plan and their intention to invest over $800 million in the redevelopment. Michelle Gambino, an attorney for the retailer, said at the time “We do not see how the jury’s verdict would in any way impact that and now preclude White Flint from carrying out its representations.”
Amy Ginsburg, the executive director of the White Flint resident and business advocacy group Friends of White Flint, said Wednesday redeveloping the mall property is an integral part of achieving the urban vision of the Pike District—the name developers adopted for the growing area around Rockville Pike.
“It’s just so important,” Ginsburg said. “I think people have heard what the lawyers have said, but I just can’t imagine that such a central location with such potential wouldn’t be developed.”
The White Flint Mall has been demolished at the site and the property is fenced off. The back of the Lord & Taylor store can be seen in the right side of this photo. Credit: Andrew Metcalf
In 2012, Montgomery County approved a sketch plan for the property outlining the construction of several buildings that would include 1 million square feet of office space, 2,400 residential units, 1 million square feet of retail space and a 280,000-square-foot hotel.
But the site planning process for the property stalled after Lord & Taylor sued the developers in 2013 over the breach of a 1975 easement agreement that stated the mall would be maintained as a “first-class” shopping destination until at least 2042. That easement agreement and the potential lost profits due to the closing and demolition of the mall were at the center of Lord & Taylor’s argument in the court case.
During the 2015 trial, Lerner Chief Operating Officer Alan Gottlieb testified the real estate market in the North Bethesda area has “a lot of room for growth” and that he’s seen strong rental statistics from other nearby developments such as North Bethesda Marketplace and Pike & Rose.
As the former White Flint Mall property sits undeveloped, other companies have been moving forward with projects in the growing area along Rockville Pike.
This week Hilton will celebrate the topping out of its new Canopy Hotel at the Pike & Rose development next to the White Flint Metro station. The hotel project is a central piece in Federal Realty’s phase two of development at Pike & Rose, which is expected to add 30 new retail stores, more than 100 condos and 264 apartments along Grand Park Avenue.
Ginsburg said Pike & Rose represents the potential for large mixed-use development projects in the area. She said the retail stores, gym, movie theater and apartments are busy, with people walking outside and visitors streaming in to eat at restaurants such as Del Frisco’s Grille, Summer House Santa Monica and Owen’s Ordinary.
“Pike & Rose has shown mixed-use development can be a success here,” Ginsburg said. “That place is hopping… it has become a destination.”
Just north of the White Flint Mall property, Foulger-Pratt and ProMark Real Estate are expected to break ground this year on their East Village at North Bethesda Gateway project that will include more than 600 apartments and about 38,000 square feet of retail when completed. That project will rise at the corner of Huff Court and Nicholson Lane, just off of Rockville Pike.
And last year, the county began construction on the “Western Workaround” road project that will straighten Executive Boulevard south of Pike & Rose to create more navigable city blocks next to the North Bethesda Marriott Hotel and Conference Center. The project also includes a new 650-space parking garage paid for by the state that the county is constructing to replace a surface parking lot at the hotel. The county has also been adding bike lanes in the area as roads are repaved.
The development projects and roadway improvements are pieces of what local leaders envisioned when the County Council approved the White Flint Sector Plan in 2010, which permits 9,800 new housing units and nearly 13 million square feet of nonresidential development in the 430-acre area. The plan also calls for creating a more walkable, urban community where residents live and work.
But the largest property in the sector plan area—the former White Flint Mall site—is now a massive dirt-covered lot with one store remaining open. However, even the planners had an inkling about the potential for controversy at the property. The sector plan notes, “Two of the companies, Bloomingdales and Lord & Taylor, own their buildings, which has implications for redevelopment.”
Part of the redevelopment called for constructing buildings on this large surface parking lot that remains at the site today. The Lord & Taylor building is in the distance. Credit: Andrew Metcalf