Working in Columbia: Downtown and business parks went up and down with economy

This is the second in a series of 12 monthly essays over the next year leading up to Columbia’s 50th birthday celebration next June. It ran first in The Business Monthly, circulating in Howard and Anne Arundel counties, and after that will be published here on MarylandReporter.com and by our partner website, Baltimore Post-Examiner. The copyright is maintained by the author and may not be republished in any form without his express written consent. Copyright © 2016 by Len Lazarick

By Len Lazarick

It was an odd celebration, even for the honorees. In hindsight, the way Ryland Homes commemorated its long, 35-year partnership with the Rouse Co. in 2001 was ironic for both companies.

In the Ten Oaks ballroom in Clarksville — at the far western edge of the Rouse Co.’s “new town” — the homebuilder that got its start in Columbia and built thousands of its first homes was saluting its patron and the provider of its home sites. Rouse, the new town developer that the 1960s media idolized, had propelled the small, home construction startup to become one of the largest homebuilders in America.

The baseball caps handed out that day said “Ryland Celebrates Rouse,” and on the back there was the cryptic embroidery “5K/$125M.” It meant 5,000 homes, a quarter of Columbia’s single family and townhouses, and $125 million in land sales.

While the two companies were described as partners, the relationship was really that of buyer and seller. Using the raw land it purchased in the 1960s, The Rouse Co. sold developed lots to Ryland, and Ryland then built houses on the lots to sell to homebuyers — and did it quickly and cheaply.

“Not too many companies have these kinds of relationships,” said Chad Drier, Ryland chairman, president and CEO.

The Cost of the Land

The relationship illustrates a key financial aspect of the entire Columbia project: Buy undeveloped farmland at low prices, improve it with streets, water, sewer, shops and amenities, and sell it for many times its original cost. Buy low; sell high.

At the celebration, there was some gentle ribbing on both sides about the most constant source of friction in the relationship: the price of land. “We don’t charge as much for the lots as we should,” joked a Rouse executive.

In 1967, the first nine lots Ryland bought from Rouse cost $45,900 or $5,100 apiece. Thirty-five years later, residential lots were going for 20 times that amount or more.

Yet among the ironies of the 2001 event was that Ryland, now a publicly traded company, had abandoned its attractive headquarters in downtown Columbia the year before and hustled off to California, Dreier’s home state. The departure from the planned community where the homebuilding giant grew up had disappointed Rouse and Howard County officials, but no one brought it up at a celebration geared toward happy recollections.

By that time, the Rouse Co. was about done selling building lots to single-family homebuilders. Not far from the Clarksville ballroom was the last of a dozen model home parks, where Ryland and other builders, some of them home-grown but smaller, had displayed their wares.

Three-and-a-half years after the celebration, Rouse itself would disappear from downtown Columbia in a $12 billion sale to General Growth Properties (GGP), one of the biggest U.S. real estate deals ever recorded.

The two companies that created Columbia were among the dozens of companies that have come and gone over the years. But unlike the tech companies that have merged or evaporated, Ryland and Rouse left behind permanent structures in which people live and work, like the 1973 Ryland Valencia model in which this essay is being written.

During their time, the two publicly traded companies were a visible corporate presence in Columbia, with executives (and their spouses) serving on nonprofit and community boards. The companies were generous financial supporters of community causes.

Shelter and Jobs

While Jim Rouse preached his grand social vision of a “garden for growing people,” those people needed shelter and jobs, shops and services — and the businesses that provided them. Those homes and workplaces were essential to the economic model that would make Columbia a viable enterprise.

As noted in last month’s essay, before Columbia, Howard County was largely a farming community with minimal employment outside of agriculture and retail. The smattering of residents in suburban developments mostly commuted into Baltimore, still a city of 900,000 people, 50% larger than it is today.

There were only two major employment centers in the county — The Johns Hopkins University Applied Physics Lab, a center for defense work where, much like today, few people knew what they did; and the Route 1 corridor.

Fifty years ago, and still today, APL is the largest private employer in Howard County, now with 5,000 employees, working mostly on federal research projects.

Until Interstate 95 between the Washington and Baltimore beltways was fully completed in 1971, Route 1 was the major north-south route on the East Coast, and already looking seedy. Warehouses, junkyards and industrial operations were concentrated there, and just east were the freight railroad tracks that serve as the border between Howard and the neighboring Anne Arundel County, from which it was lopped off in 1851.

Aside from Columbia shopping centers — more on those next month — the principal employment centers were to be in downtown Columbia and east of Route 29, ringing the edges of the new town’s residential growth.

With few people living there and the highways unfinished, Rouse itself built the first office buildings on the farmland that became downtown. It built a hotel there as well, before there was a market to support one, the low-slung Cross Keys Inn. The hotel later added the current tower, becoming the Columbia Inn, and then in 1998, Rouse finally unloaded the property to become the Sheraton it still is today.

The company slowly added seven more office buildings over decades, but it saved the choicest spots until the population rose and increased the value of the land.

The East Side

For the east side of Columbia, the company followed the pattern of developing business sites for others to build on. The first business to build there was Hittman Associates, which at the time did environmental studies, later branching into medical and nuclear equipment.

Fred Hittman chose Columbia because of its central location and because of a promised lifestyle that would make it easy to recruit highly educated workers.

“It was more of a dream place at that time,” Hittman told the Baltimore Sun in a 1992 interview. “But the promise for me was that this was a place that would attract and hold scientists and engineers.” Hittman would become the first chair of the new Howard County Chamber of Commerce.

It was a refrain that would echo through the decades from firms large and small about the decision to locate in Columbia. The first reason related to the time-honored real estate mantra of “location, location, location,” the central location that led Rouse to scarf up 14,000 acres of farmland. The second reason was the educated workforce, including a concentration of scientists and engineers.

For decades, “Columbia had more cachet than Howard County” as a business address, said Dick Story, the county’s economic development director from 1993 to 2006. He recounted the tale of a developer who wanted his new office buildings to have a Columbia address, despite its Ellicott City zip code. Go ahead and call it Columbia anyway, Story told him. A postal inspector told them to knock it off.

General Electric: In Then Out

 

 

 

Hittman’s modest industrial building was small potatoes compared to the major sale for the biggest parcel on the east side of Columbia to one of the world’s largest corporations, General Electric. Rouse sold 1,125 acres south of Route 175 between Snowden River Parkway and I-95 for what was to become the GE Appliance Park East. It was projected to employ more than 10,000 people, manufacturing and distributing appliances, similar to an existing appliance park in Louisville, Kentucky. Imagine how different the Columbia economy would be today if manufacturing had been its core industry.

Ultimately, GE only built four mammoth buildings on a third of the site, and employment topped at 2,800 in 1974, when the company closed the air conditioner plant. Twelve years later, it shuttered the microwave oven plant as it began importing machines from Japan and Korea. It finally shut the range plant in 1990 as it acquired a more productive Georgia facility.

The saga illustrates the vagaries of the economy and the fluctuating dynamics of individual industries that were constantly challenging the profitability of the Columbia project.

From the time Rouse started acquiring land in 1962, there have been seven national recessions. The most devastating for Rouse’s Columbia project was the 1973-75 downturn that combined the Arab oil embargo, high inflation and high unemployment. Land sales plummeted and Howard Research and Development (HRD) — the Rouse Co. division that was building Columbia — would have gone bankrupt except for an infusion of cash from Connecticut General,  original financier of Rouse’s entire Columbia project.

The Rouse Co. bought back the two-thirds of the land that GE never used, and later, as GE pulled out, some of those buildings, as well. In the long run, while the 10,000 well-paid GE manufacturing and office workers never materialized, Rouse used the land to create Columbia Gateway, which eventually would include one of the largest concentrations of high tech businesses in the Baltimore-Washington corridor.

By 1999, Gateway would become a hot location, but it was a long time coming, 30 years after GE’s initial deal.

The Hot Location

As difficult as the 1970’s recession had been for Rouse’s project, the 1990s recession was more severe for the Maryland economy because of the cutbacks in defense spending from the collapse of the Soviet Union ending the Cold War.

As the commercial real estate market struggled to overcome this, as well as digest speculative overbuilding from the 1980s, HRD sold only one measly acre of land in Gateway — for a parking lot.

“I aggressively sat by the phone, waiting for it to ring,” recalled Ed Ely, HRD vice president for business land sales.

The situation in Gateway was so dire that an empty glass-and-marble five-story office building was sold to the county government at a fire-sale price, becoming headquarters for several agencies, including the newly privatized Economic Development Corporation.

Then along came Micros. The fast-growing company, founded by a graduate of Howard High School, supplied hardware and software to restaurants and hotels worldwide. Its 700 employees were scattered among several buildings in Beltsville. A few top executives already lived in Howard County, and “we felt [relocating there] could help our technical recruiting efforts,” its chief financial officer told me.

In 1999, it put up the first Gateway office building visible from I-95.

For a brief time from 1999 to 2001, Gateway and other Columbia locations were the epicenter of an explosion of fiber optics research, with Corvis the biggest player, employing 1,500 people at one point and raising $1 billion in its initial stock offering. Companies large and small were trying to capture a share of the photonics revolution, boosting communications and Internet speeds through fiber optic cables.

The movement was so large that we at The Business Monthly produced a special section for a national engineering conference in Baltimore on fiber optics in 2001, featuring all two-dozen Maryland companies.

Those that survived the end of the boomlet transformed themselves by merger or acquisition. Some simply went out of business. The Micros sign that graced its building for 14 years has been replaced by its new owner, Oracle, repeating the continual pattern where large high tech firms eat small tech firms.

There are few large headquarters of home-grown businesses anymore. MedStar, the hospital conglomerate that has agreed to occupy the newest downtown Columbia structure going up at Little Patuxent and Broken Land, is an exception.

Not only is the Micros sign gone, so is Arbitron, the once-thousand-strong audience monitoring firm for radio stations on Broken Land Parkway at Route 32. It was purchased by Nielsen, which now has a smaller presence here. The Flier building on Little Patuxent Parkway across from the community college, once the headquarters for a 13-paper chain of community newspapers, has stood vacant for years and is slated for affordable housing.

Long-time community leaders note the loss in corporate presence here.

“The business community used to be very much involved in social issues here … as corporate citizens,” observed Pat Kennedy, president of the Columbia Association for 26 years. Now, there are a lot of “corporate addresses” and “absentee ownership,” noted Roger Caplan, head of the Caplan Group, an advertising and marketing firm.

Not Like Columbia

What’s even odder about this long run-down of the business underpinnings of Columbia and its role as a key employment center for the region is that Gateway may officially be part of Columbia, but by look and feel it and the other local business parks could be anywhere. Their landlords and tenants generate millions for the Columbia Association lien, but there’s little sense that they are part of Columbia at all.

The majority of employees in Gateway, or any Columbia business park, do not live in Columbia, much as the majority of Columbia residents do not work in the new town, as was the case from its earliest days. Only one out of five working Columbia residents has commuting times of 15 minutes or less, and close to half (45%) have commuting times of 30 minutes or more. Living and working here, as I have been able to do for half my career, might have been the ideal, but it has never been true for the vast majority of residents.

Nobody lives in Gateway, except for one long-term-stay hotel. There is no mixed use, and but a puny strip of retail. Larger office buildings have their own cafeterias, or at least delis. Even with 12,000 or more people working there, pedestrian traffic is nil.

Even Gateway’s street names have none of the striking weirdness of Columbia residential cul-de-sacs, drawn from American literature. Instead, they are named for American inventors and scientists: Robert Fulton, Samuel Morse, Alexander Bell, Benjamin Franklin, Lee Deforest. On any weekend, the surface parking lots that encircle the buildings are empty.

There is still prime acreage for sale in Gateway, and while the focus of Columbia’s development has shifted to downtown, former County Executive Ken Ulman, who guided the renewed plan for the center of Columbia, said, “Columbia Gateway has got to adapt” as well. Laura Neuman, who succeeded Dick Story as Ulman’s economic development director and later become Anne Arundel County executive, agreed that Gateway “needs a mixed use development.”

“People like to live where they work,” Neuman said, recalling her experience as a top executive of Matrics Technology Systems on Stanford Boulevard in Columbia west of Gateway, where there was a bar in the building, a deli, a dry cleaner, and hotels and restaurants that the staff used nearby.

A Familiar Setting

The room on the top of the old Rouse Co. headquarters was as familiar to me as any in Columbia. The modern chandeliers with parallel panes of glass are gone, the air ducts exposed and the floor bare, but the balconies still overlook Lake Kittamaqundi.

I have this visual memory of a late 1970s annual meeting of the Rouse Co. there, with top executives sitting at an elevated table, getting ready to start the meeting. One called out to me, a lowly business reporter for a weekly community paper, about a news brief that had run with the headline “Rouse has bad quarter.” Heck, it was just a rewrite of a press release, and maybe the headline did overblow the financial results, but what’s the big deal?

The big deal that I didn’t realize till then was that in the days before the Internet put everything online, stock analysts would subscribe to dinky local publications where public companies operated, looking for clues and problems the companies would not freely disclose.

The space once called the Kittamaqundi Room, and later the Spear Center, was long the scene of the annual party of The Columbia Foundation, where you were likely to see all the movers and shakers in town. It was the site of memorial services as well.

This was also where General Growth Properties, the Rouse Co. successor, had unveiled some of the first illustrations of how Columbia’s downtown might look. Afterward, Pat Kennedy and I would briefly discuss my book idea, he suggesting I should write about Columbia as a “lived experience,” as I am doing in these installments.

In this room last month, I sat among mostly old friends and acquaintances to get an update on the downtown plans that may, at long last, 36 years after the original target date for completion, accomplish the goal of Columbia’s downtown as “a complete city, not just a better suburb,” as Jim Rouse had said.

Other people had their own memories of the room, now an unoccupied floor over the Whole Foods grocery.

“This is where I had my prom,” said Howard County Executive Allan Kittleman, who graduated from nearby Atholton High School as Columbia was being built in the 1970s.

The July 8 event was ostensibly to provide an update on the progress of the downtown plan to put the final touches on the remaining 391 acres of town center, already 10 years in the works and six years since its formal passage.

That day, Kittleman introduced legislation moving forward the final elements of the plan.

“Success is not inevitable,” he told an audience of about 150 invited guests, all previously involved in the planning. “We need to jump start the plan. … We need to make sure this happens before we’re all 95 years old.”

The key is to make the new Columbia core into a place to live, work and play, built around the town’s first public structure, a revived Merriweather Post Pavilion, Kittleman said. Howard Hughes Corp., GGP’s spin-off, is calling this area the Merriweather District.

It combines apartments, retail, offices and public institutions in a walkable mix with a decidedly urban feel. Plans call for 6,400 residential units — up 900 from the 2010 plan — 4.3 million square feet of office space, 1.25 million square feet of retail and a 640-room hotel.

Building a 21st-century city “is one of the reasons I moved here from Baltimore County,” said Howard County Council Chair Calvin Ball. “’Revitalization’ is the right word for what we’re doing here,” and the enhanced center of culture and commerce already in the works is “exactly what we need.”

His council colleague Mary Kay Sigaty, whose West Columbia district includes downtown, told the audience, “If Columbia is only a great place to raise a family, what are we missing? How are we bringing young people into the community?”

Having lived here 44 years, “I continue to wait for the promise to happen,” Sigaty said.

The cocktail hour reception was really a pep rally for the final implementation of the downtown plan. A key element, long planned but not much publicized, is a proposed $93 million tax increment financing, dubbed a TIF. It authorizes the county to float bonds based on the tax proceeds from future development to pay for infrastructure, in this case a 2,500-space parking garage designed to service Merriweather in the evenings and weekends, and office buildings during the day.

When the county council began holding extended hearings on the proposals the following week, it became clear why supporters of the plan needed to be rallied.

Speaker after speaker in two four-hour sessions decried the plans. Key sticking points are the TIF — many called it “a handout” to the developer, “a free ride” — and Council Member Jen Terrasa’s push to increase the amount of affordable housing from 10% to 15%. That increase was favored even by some of those backing other elements of the plan.

Too Dense, Too High, Too Many

Over and over, the council heard people say there were too many apartments, they would overload the schools, the hospital, the roads; traffic would be terrible, like the mall at Christmas but year round. The proposed buildings were too high (most of the residences are seven stories and the few tall office buildings are 14 stories). There would be too many people and too much density — though the amount of greenery and trees shown on site maps and renderings is more than downtown Bethesda or Rockville.

LaTonya Peters had moved her family to Columbia for the schools and pathways. “I’m very concerned with the urbanization. … The density of this plan seems to have no limit.”

“We wanted the suburban lifestyle. If we wanted a city, we had plenty of other choices,” Peters said.

That sort thinking runs counter to most of those who developed the downtown plan, like Ken Ulman, who devoted immense time and energy as county executive to enacting it.

“People want to live in cities,” urban centers that are walk-able and bike-able, said Ulman, now an economic development consultant.

“You want the right mix. What’s the scale; what’s the mix? How tall should a building be?”

Ulman faced opposition all along the way. “I don’t begrudge people’s anxieties about change,” Ulman said. But “things change while you’re fighting change.”

“We’ve had a great 50 years” in Columbia, said Ulman, 42, born and raised in Columbia and now raising his own family here. “There are a lot of places that used to be a great place to live,” he said. “Folks assumed we would be one of those places,” but “we’ve got to stay ahead of trends.”

Next month in Columbia at 50: Shopping, retailing, housing.

Len Lazarick has lived and worked in Columbia as a journalist for more than 40 years. He is the editor and publisher of MarylandReporter.com, a news website about state government and politics, and a political columnist for The Business Monthly. This article is copyright © 2016 by Len Lazarick .