Company devalues former Fort Ritchie U.S. Army base

Decision based on re-evaluation of property's development prospects following Army's disclosure that tactical herbicides had been tested at base

April 07, 2011|By HEATHER KEELS |
  • The company redeveloping the former Fort Ritchie U.S. Army base has notified its investors that it does not expect to recover its $28 million investment in the property and has written down the value to zero.
Herald-Mail file photo

The company redeveloping the former Fort Ritchie U.S. Army base has notified its investors that it does not expect to recover its $28 million investment in the property and has written down the value to zero.

Corporate Office Properties Trust made that decision based on a re-evaluation of the property's development prospects following the Army's February disclosure that tactical herbicides, including Agent Orange, had been tested at Fort Ritchie, according to a U.S. Securities and Exchange Commission filing and a statement issued by the company.

COPT believes those disclosures are likely to cause further delays in pending litigation related to the property and that they also "increase the level of uncertainty as to (COPT)'s ultimate development rights at the property and future residential and commercial demand for the property," Stephen E. Riffe, COPT's executive vice president and chief financial officer, wrote in a March 31 report filed with the SEC.

The base was closed in 1998 and has been transferred to the Columbia, Md.-based COPT, which planned a development including 1.7 million square feet of office space and 673 homes and apartments. A judge ordered that the project put on hold in late 2009 because of a lawsuit filed over the project's environmental impact.

The SEC filing said that COPT analyzed various possible outcomes and their resulting cash flows and determined the carrying amount of the property — its value on their books — was unlikely to be recovered. That determination was reviewed by the audit committee of COPT's board of trustees, the filing said.

Project not dead

A COPT spokeswoman said the company could not comment beyond the information in its statement to investors, but others working closely with COPT on the project said the news does not mean anyone is giving up on redevelopment.

"With (COPT) being a larger real estate investment trust company, they have to say things like this if something's taking longer than they originally proposed that it would," said Timothy R. Troxell, executive director of the Hagerstown-Washington County Economic Development Commission.

"Investors are always wondering when they're going to get their money back, and when they can't tell them that, that's why, I think, they decided, 'Let's write this off so we don't have to keep trying to answer this question.'"

George G.B. Griffin, chairman of the board of directors of PenMar Development Corp., the nonprofit organization created by the state to oversee the transition of Fort Ritchie to civilian uses, offered a similar view.

"I have been assured by people who are in authority at COPT that they are not even thinking about abandoning this project," Griffin said. "It's just that they, like we, are frustrated with the lack of progress because of the injunction that the court has put us under to stop all redevelopment."

Environmental questions

In November 2009, Royce C. Lamberth, chief judge for the U.S. District Court for the District of Columbia, ordered the project be put on hold while the Army revisited its assessment of the development's environmental impact.

That review, which focused on the reuse plan and its impact on historic and environmental resources, was wrapping up when the herbicide testing came to light at the end of January, Army environmental attorney David Howlett said.

Since then, the Army has hired an expert consultant to write a report on the impact of the herbicide testing, Howlett said.

"This particular person is going to review the evidence we have of testing from, I believe, 1955 to 1963, and make a determination whether it is possible that there would be chemical residue from those substances that would still be there 48 or more years later," he said.

That report should be completed by April 30. The Army will then need an additional 30 days to issue a supplement to its environmental report about the Fort Ritchie redevelopment project, Howlett said.

"After plaintiffs have been afforded an opportunity to review the supplement, the parties intend to meet and confer to identify any unresolved issues pertaining to the litigation," according to a status report submitted to the court on March 31, Howlett said.

Howlett said in a Feb. 23 interview that, under the Comprehensive Environmental Response, Compensation and Liability Act, commonly known as Superfund, the Army has an obligation to investigate and respond to releases of hazardous substances at its former installations.

"We've got an obligation to go back and clean up the mess, even if we have transferred the property to a new owner," he said.

The Army will use the expert consultant's report to determine whether it is necessary to physically test for residue of the harmful chemicals in the herbicides, Howlett said Thursday.

Griffin said the experts PenMar Development officials had talked to have told them any herbicide applied so long ago would have dissipated by now.

"I just wish that the Army can satisfy the court, and the injunction can be lifted, and COPT can get back to development, because a lot of people up here lost jobs (when the fort closed)," Griffin said. "It's now been 12, 13 years, and we need some work. We need some development up here."

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