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Will New Superman Building Proposal Stand Chance for Success?

Wednesday, February 12, 2014

 

The fate of the vacant Superman Building in downtown Providence is once again being considered. Will development succeed this year?

High Rock Development has announced it is looking to develop the Superman Building at 111 Westminster Street downtown after its failed bid last year, and a bolstered group of proponents -- as well as opponents -- are lining up on the issue once again.

Touting that "already a broad cross-section of community leaders, preservationists, unions and business leaders are supporting plans to save the building and the new public private partnership," High Rock is attempting to turn the page on last year's effort to obtain $70 to $75 million in local, state, and federal funding that prompted comparisons to the doomed 38 Studios deal by opponents, who are voicing their concerns now this year as well.

Monique Chartier with RI Taxpayers said, "It is to be hoped that the General Assembly does not move forward with a "public/private partnership" to redevelop or support the Superman Building. While we sympathize generally with High Rock's plight, they should receive nothing from the public sphere beyond what any other property owner might qualify for. State and local taxpayers already pay a high price for a bad economy that was legislatively engendered by an abysmal business climate. State elected officials cannot heap on the additional cost of financially propping up real estate devalued in no small measure by the same bad policies."

Speaker of the House Gordon Fox, who said that last year's proposal was "too costly," said that as far as this year is concerned, it's a "question of numbers. "

“I am always open to listening to a proposal by the developers, and I certainly recognize the importance of the Superman Building to downtown Providence. However, I have not seen any proposals in this legislative session and should we receive one, it will go through the normal legislative hearing process," said Fox. "It is a question of numbers, and last year’s plan seeking state support was deemed to be too costly. The General Assembly reinstated the historic tax credit program last year, and the developer chose not to apply for up to $5 million in credits.”

A New Approach

This year, High Rock has said that "part of the new 111 Westminster public private partnership proposal [is] the building’s owner is guaranteeing completion of the renovation, providing significant new debt/equity for the project, establishing an endowment fund to support the ongoing maintenance and programming in Kennedy Plaza, and committing to work with union trades."

The coalition of supporters currently includes developer Evan Granoff, Building and Construction Trades President Michael Sabitoni, Providence Preservation Society's Brent Runyon, Cliff Woods with the Downtown Providence Parks Conservancy, and Betaspring's Melissa Withers.

According to High Rock, the "111 Westminster Development Team is reviewing the development economics of the project and will work with federal, municipal and state leaders to find a solution to get the project moving."

Gary Sasse, former Director of Administration and head of RIPEC, said, "For the taxpayer even to consider providing the owners of the Superman Building with preferential tax treatment and or financial assistance independent due diligence should prove the following beyond any doubt."

Sasse said that would entail that "the owners of the property set forth a business plan that both demonstrates that there is a market for the contemplated use of the Superman Building, the business plan demonstrates that the project will be profitable within 2-3 years, the owners provide collateral to secure any state tax expenditures or underwriting, the owners underwrite a share of redevelopment effort for Kennedy Plaza and invest additional equity in the project, and property tax stabilization be for a limited period of time."

"Government does not always do a good job picking winners and losers," continued Sasse. "Public dollars spent for private profits to often produces corporate welfare and 38 Studios type schemes. It is much more cost effective for government to support structural investments in work force development and public infrastructure then one off projects.

Mazze, Taxpayer Groups Voice Concerns

"The Superman Building, a High Rock project, is a terrible candidate for public funds. To retro-fit the building for residential units, retailing and other commercial uses could probably cost in excess of $100 million after all the structural defects are found and corrected and the building is reconfigured," said URI Distinguished Professor of Business Edward Mazze. "Where are the residents and businesses going to come from - there are still condominiums that have been empty for years in downtown Providence. There would be few services in the downtown area for residents of this building. There seems to be no rush of commercial realtors interested in the building, and people working in Providence anxious to pre-buy any of the anticipated residential units in this building."

Mazze continued, "Whatever High Rock market studies have shown in the past, private investors do not see the opportunities as the building owner. This is the message that legislators should be hearing. The solution may be to tear down the building. Any investment, including historic tax credits, would bring a small or no return on investment into the foreseeable future. Construction would create jobs but an empty building will create no tax revenue for the city or state. It is time for government leaders to take some action on this building where taxpayer money is not at risk....just say NO."

Lisa Blais with taxpayer advocacy group OSTPA said, "The Superman building is as risky as the 38 studios venture and may cost more than that debacle . The issue with financing such a project is not just RI's current economy, but the projection that jobs will not reach the pre-recession levels in the near future. The state has already undertaken a risky development project - the I 195 parcel. A significant amount of financial resources have been committed to building a "field of dreams" not knowing if, when we build it, they will come."

"The state continues to wait for the return on investment for projects like the Interlink and the North Kingstown train station. RI is so highly leveraged at present, it simply does not seem feasible to force taxpayers to participate in another public/private partnership where the risk is so high," said Blais. "There is nothing different in this session compared with last session, with the exception of the rate of unemployment moving in the wrong direction."

Taking Stock

Former Providence Mayor Joe Paolino

Former Providence Mayor Joseph Paolino, who recently announced an acquisition of three new properties in Providence, weighed in on the potential for the Superman building.

"They want housing, that's great; retail and restaurants, great," said Paolino. "I hear they want to do a public-private partnership, but I'm not sure what that means. Right now they're lining up stakeholders, we're not sure yet what they want from the public. Define help -- help means money."

Paolino said of developer David Sweetser, "Give him credit to say he'd put up a bond to guarantee any work is being done -- you need an assurance bond, of course."

As for the potential of the proposal, Paolino said he had to hear more details. "Are they still looking for the $75 million in city, state, federal aid? You have to compete for the tax credits. That building is so big, they should get $10M in tax credits.

Of the residential part of the equation, Paolino continued, "I think they'd be smart to pursue an 80/20 program," meaning residences would be 80% market rate, and 20% low income.

"Will they have taxes grandfathered in? So they don't increase taxes? Do they want the city to take less in taxes?" posed Paolino. "They've got to be ones to come forth and say, "here's what we want." 

 

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Comments:

Christopher Lee

The right people will be bribed and the project will go forward, regardless of taxpayer interests. It's the Rhode Island way.

David Beagle

Sadly, there just doesn't seem to be overwhelming confidence that democrats will do the right thing with this building. Too many with something to gain, and the power to attain it, are always lurking. This state didn't get into last place by making the most prudent financial choices.

michael riley

So what will the State or Providence do financially to help this project? will they cut retiree pensions some more or raise taxes?

(theme to jeopardy)

Thomas Kolodziejczak

City and state officials should walk...no RUN from this deal as fast as they can. High Rock's "new and improved" proposal is nothing more than a repackaging of the last deal that doesn't benefit anybody other than the developer. And why should the taxpayer bail out a developer who paid 33 million for a building when the economy was tanking? Providence has granted far too many tax breaks to developers over the last 20 years and very few to the citizens of the neighborhoods who pay the bills. To quote Pete Townshend...we won't get fooled again!

Chris Westerkamp

We don't know what the result of all the I95 waterfront development will be yet. The prospect of a successful venture there has tremendous opportunity to spur economic growth and showcase the city. The building is not going anywhere for now. There is no demand for more condos or shops downtown - why build more?

Joan Overcash

Just say, "No".

John Onamas

I'm surprised at all the negativity. Forget about 38 Studios and evaluate this on its own merits. A successful project will mean jobs and business for Providence and RI. I'm not saying due diligence isn't required, but if the choice is between a vacant cornerstone property and some taxpayer funding to kick start the project, our elected leaders need to figure out a way to make this work.

Redd Ratt

Lets not socialize the losses of a private for profit business. If no private capital wants to invest in the project, then the amateurs sure shouldn't be doing it. Plenty of empty space downtown already. When it makes sense for private money to flow into the project it will.

ersri retirees united

Chafee has proposed increasing the state's bonded indebitness to raise money for historic tax credits-among other projects.

Therein lies your answer to the question asked in the title of this article.

Providence already has a yrly.bonded indebitness of approximately $78M, but even though it is in no position to increase that indebitness,they'll probably join the rush to throw money at this developer.

Marie Dawn Christie

High Rock purchased an albatross and needs to live with the bad decision on their own. Perhaps they can sell it on E-bay.

Katy Sloop

RI cant afford to prop up somebody's bad real estate investment. Just let the market work for once. It will go into foreclosure, it will attract bids from major national developers, and they will do something great with it, with no corporate welfare required. That's how the free market works. Since when does the RI taxpayer need to fix the financial problems of a private investor? City is almost bankrupt. This wont be the last big empty building in Providence. Get used to it.

Joan Overcash

Our elected leaders don't have to do anything about this property. Plenty of investors are looking for opportunities.
The owners have to find private capital for their project. If that isn't available, then the project isn't feasible.




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