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Morgan Stanley to take role in Fort Ritchie redevelopment

April 14, 1998|By BRENDAN KIRBY

A Wall Street powerhouse agreed Tuesday to join forces with the development corporation that is trying to convert Fort Ritchie into a technology and training center.

The agreement with Morgan Stanley Dean Witter & Co. gives local officials access to a company with hundreds of millions of dollars and could save Washington County taxpayers a substantial amount of money.

Under the six-month agreement, Morgan Stanley will fund market research and other studies to determine the economic viability of Fort Ritchie, which is nestled in the northeast corner of the Washington County.

If initial research shows redevelopment is feasible, the PenMar Development Corp. will negotiate a long-term agreement with Morgan Stanley and the Boston-based Simon Properties, its partner in a venture exploring military base conversion projects.

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The Maryland General Assembly last year created the development corporation to buy the land from the Army, which will leave the base in October under a 1995 base-closing plan.

"They certainly bring a recognizable name and capital. I believe it's a great coup for Fort Ritchie, PenMar and Washington County," said William J. Reuter, chairman of PenMar Development Corp.

"This is like having the IBM of financial institutions at the table," said Robert P. Sweeney, PenMar executive director.

By committing potentially tens of million of dollars, Sweeney said Morgan Stanley could save taxpayers money in two ways. First, he said the company would pick up costs that otherwise might have been paid for with public money.

"There are communities that have put tens of millions of dollars into the development process," he said.

And, Sweeney said, Morgan Stanley almost certainly would be able to add the land, on which property taxes were not paid while it was a military base, to the tax rolls in a timely manner.

The Morgan Stanley Real Estate Fund is the firm's third real estate fund. It contains $750 million for domestic investment and another $750 million for international investment, company officials said.

Tuesday's agreement is part of the company's Helios Project, which is seeking to redevelop military bases. Martin Lamb, vice president of Morgan Stanley Real Estate Fund, said the company is in serious negotiations for about six other bases.

He said Fort Ritchie is the first site for which the company has signed an agreement.

Although Morgan Stanley has the chance to pull out at the end of six months if officials believe the project can't be profitable, Lamb said several factors give them cause for great optimism:




- Location. The 638-acre site near the Maryland-Pennsylvania border is 70 miles north of Washington, D.C.

- Physical layout of the base.

- Use. Fort Ritchie is a low-intensity Army base that poses fewer problems than do Air Force bases or facilities that were used to test bombs, Lamb said.

If things go well, Lamb said the company would negotiate a long-term agreement with a duration of perhaps five to seven years. During that time, Morgan Stanley could either buy the property or become co-owners with PenMar Development Corp.

Lamb said it is too early to predict how much Morgan Stanley would spend, but the total cost would be substantial.

"One could easily spend $50 million to $100 million on the site," he said.

Lamb said Morgan Stanley will begin searching almost immediately for companies that might move into the base. He said it is important to move swiftly while the economy and the real estate market are healthy.

"Who knows how hot it will be in five years or 10 years," he said.

Lamb said Morgan Stanley will repeat some of the research that already has been conducted. He said some of the real estate data, even if only two years old, is dated because the market has changed dramatically.

PenMar had proposed developing the property for biotechnology companies and executive training seminars under a plan approved by the county in early 1997. Sweeney said PenMar would work with Morgan Stanley to ensure that the county's objectives are met.

Lamb said development would be guided by marketplace realities.

"I presume that if there are changes they will be modifications, not wholesale changes," he said. "At the same time, it is important to realize this project is going to move forward if an economically viable plan can be arrived at. In the end, the community can wish for a number of things but to the extent that that interferes with an economically viable plan, I think there's a tension that will have to be worked out."

The Washington County Commissioners hailed the agreement on Tuesday.

"This is more than a little step. This is a giant step," said Commissioners President Gregory I. Snook. "This is great. This is what we have been waiting for."

Reuter said he is excited about the partnership.

"The show's not over. It's really just beginning," he said.

The Associated Press contributed to this story.

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