January 21, 2008

Banker & Tradesman January 14, 2008

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Berkeley Continues Search For Urban Village People

Lack Of Office Interest in Worcester's CitySquare Prompts Developer to Cut Project in Half


More then a year after a developer promised to transform the failed Worcester Common Outlets into an urban village, the project has yet to attract a single commercial tenant.

The Cornerstone of the city's latest effort to rejuvenate the downtown is CitySquare, a $504 million redevelopment of the former mall. Berkeley Investments has held out the hope of replacing the shuttered shopping center with a mix of medical and professional office space, condominiums, restaurants, retailers and theatres within steps of the MBTA's commuter rail.

But a lack of interest in offices at the proposed transit-oriented location has forced the Boston based developer to cut the project's initial Class A space component in half.

Worcester Mayor Konstantina Lukes, who has expressed skepticism over the project, said she is unhappy with the latest setback.

"Taxpayers are really frustrated. " she noted. "Many of us thought it would have moved forward by now, but the fact that the mall is still standing is a symbol that the project is stalled."

In October , 2006 Michael O'Brien, Worcester's City Manager, and Young Park, Berkeley's president, signed a 392 page agreement that touted $470 million in private investment and $94 million in public financing. At the time, they said the was a "significant milestone," and the "City Square and Worcester are poised for success."

Under the proposal, the empty mall and a portion of the parking garage would be razed. In its place would stand a medical office building, multifamily apartments, loft-style condominiums, senior housing, and retail spaces to accommodate restaurants, outdoor cafes, a multiplex movie theatre and a health club.

In addition, new roads would reconnect the downtown with Washington Square, Union Station, and Front and Shrewsbury streets. A 1,025 space underground parking garage also is planned.

But the three phase development, which is expected to take 8 years to complete, remains on the drawing board. O'Brien and Park did not return calls seeking comment.

Barbara Smith-Bacon, a Berkeley Vice-president, said construction was to begin once tenants were found for the 500,000 square feet of office space. The project was hindered, however, when St Vincent Hospital determined it no longer needed a new 275,000 square foot medical office building at CitySquare.

"If you want to put a negative spin on it, you can" Smith-Bacon said. "But we're facing economic realities and working with the city so that we can put tenants into the project in smaller bits. In this way, the city gets the same security of making sure they don't have to put money into the deal until tenants are lined up."

Smith-Bacon noted that it is not unusual for large development projects to take years to launch. Columbus Center, the $800 million air-rights project to be built over the Mass Pike between Boston's Back Bay and South End neighborhoods has yet to break ground, despite approved in 2004.

Smith-Bacon said factors that may have contributed to the CitySquare delays include cost of the real estate construction, where prices have increased 25% in the past three years, and a double digit vacancy rate in Worcester. As a result, she said, they will try to start a 250,000 square foot building.

"We are feeling very good about getting this started," she added. "But I cannot say it will start in six months because there's lots of work to do. We are having discussions with 10 to 20 potential tenants. The point is everyone at all levels are working extremely hard together to get the project launched.'

CitySquare has been touted as the largest public-private partnership outside of Boston in the Bay State's history. The project, which would be on 20 acres in the heart of Worcester, would total more then 2 million square feet of mixed-use development and reunite downtown streets that were taken during an urban renewal effort in the 1970's.

Philip Desimone, a managing director for the global real estate services and money management firm Jones Lang LaSalle,and a leasing agent for the project, refused to concede that CitySquare is in jeopardy.

"There are fewer challenges with this site then there are with others because it's permitted, ready to go and has broad support," he said. "If there is a challenge, it's finding someone who wants to locate in downtown Worcester and make it a signature spot for them".

For Desimone, the project is personal because his grandfather owned a haberdashery in the downtown and his father still practices law on Main Street. He disputed suggestions that time could run out and the developer might withdraw."

"Why does there have to be a deadline?" he asked. "What else are you going to do there? This is pivotal project to transform the downtown. A few years ago I visited New York's Times Square and noticed all the corporate headquarters there. That place use to be a dump. Now it's alive and vibrant. Maybe if CitySquare gets built, suddenly college kids will go there and it becomes the place to be."

Momentum for a fresh start for the downtown took shape in 2001 after Timothy Murray was elected Mayor. By 2004, longtime City Manager Thomas Hoover resigned and O'Brien, the city's former Parks and Recreation department commissioner, was tapped as the new manager. O'Brien had developed a reputation for strong leadership during his time at City Hall, city councilors said.

That summer, Murray called on the Worcester Common Outlets' owner to explore alternative uses for the site and threatened to take the property by eminent domain if a reuse plan was not devised. Berkeley stepped in and purchased the failed retail center and two corporate office towers for $30 million form Harford based Cigna Corp.

Since then, Murray has been elected lieutenant governor. In an interview with Banker and Tradesman, he said razing the mall and a portion of the parking lot is pivotal.

"It's not real until the first wrecking ball hits," said Murray.

18 comments:

Anonymous said...

The city needs to start looking outside the box. Two shopping centers have failed here, that should send a sign. Mixing shops in with condo's and medical offices is not going to be a huge attraction. They need to find something unique that will draw people in. The Mass Museum of Contemporary Arts in North Adams is a perfect example. They turned a vacant mill into the countries largest contemporary arts center. People come from everywhere to visit this small community in the Bershires (in the middle of nowhere). Now their community thrives, other small businesses thrive. I'm not saying we need an arts center in Worcester, but they need to find something unique to call thier own.

Dave

Anonymous said...

In Worc we convert old mills into low income housing, often with lotsa help from Washington.........and then we go broke when all the kids who live in these newly created, densely populated housing sites end up in our school system.

My business model proposes that these old mill buildings be purchased by the city and razed and grassed over.......no park just grass and/or fenced in. It's a much less expensive porposition in the longrun for the city. Intensive residential dev'ment of these sites is a prescription for a more bankrupt city than we already have.

Radical idea I know, but also true.

We dont need Jim (Havana Jim) McGovern doing any more photo ops in Main South and bankrupting the city with his 3 deckers that cost the taxpayers $600,000 to re-hab that are then sold for $175,000 to low income home owners.

What we do need is more Worc. middle income customers for the soon to go belly up Hand It Over Theatre. Park Young says they're coming, we just dont know when.

File Under: I am From Missouri

Bill Randell said...

I do not know about the rest of you, but I was kind of shocked when I read the story. Maybe it was common knowledge, but I had no idea that the new building for Class A Office Space had been cut in half, double digit vacancy rate for Class A Office Space and not one commercial tenant?? Did we not have a movie theatre committed??


Again maybe this already and I am late to the dance, but the article kind of shocked me.

Anonymous said...

I never knew we had a commitment from St V's for 275,ooo ft &&& that St V's then changed their mind on it ??............or if I knew it I forgot about it......

and the Dow Jones futures for tommorrow morning are "indicating" a 500 pt drop for the markets open tomorrow.......overseas market were off 5-7% today

MY God between Manoogs and all the bad economic news today, I'd say we're in the you know what...

Anonymous said...

I love the idea of buying a downtown condo for 375K. I cant wait to go ice skating on the new rink and when I'm done have a piss-stained PIPer ask (threaten) me for money. Maybe we could stroll along Main Street and shop at all the wonderfull dollar stores. Downtown Worcester is just like the Ford Motor Company- It's dead but doesnt know it yet.

Anonymous said...

Take a look at any photo of downtown from 30 years ago. Look familiar? Of course it does. With the exception of the beautiful Chestnut St. building and the truly horrific flophouse in the sky at Main & Chandler you can almost hear the strains of Styxx and Journey (God help us) There is a theory taught in econ 101 called "opportunity cost". I feel if we only had four or five really strong talents in our City government over the last 30 years, Worcester would be dramatically different today. Its not too late, but the street lights have been turned on.

Anonymous said...

Deval, you have to blame the council. No one person (or position [manager?] alone could be responsible for the state worc. is in.

Correct me if I am wrong, but the flophouse skyscraper would never have happened without money form Washington. Fed'l money & to a leeser extent money from beacon Hill is going to sink the city b/c it creates dense, intensive, low income residential land use.....which sends too many kids into the school system that we cannot afford.

Speaking of money from washington, WTH is going on with Havana Jim McGovern giving Holy Croos a $750,000 GRANT to reconstruct/redesign McKeon Rd. I almost gagged on my Rice Crispies when i read that. Shouldnt the money go to the city. City owns the road right, unless we're taking some land from HC as part of the road work in which case it should have just been taken by eminent domain. So now HC is going to get to dictate how the road is re-designed? Back in the Mid 50's they managed to have I-290circumvent Fitton Field to the great dismay of anyone who has tried to navigate the I 290 curves in that area..........and forget the motoring public that were crushed to death in a constr site accident when the I-beams all domino'ed killing motorists who were driving under The bridge at the time. That bridge would never have been needed if I 290 was routed ove Fitton Field. Isnt it nice that all the east bound travelers get to see all of Mt St James in all its glory.

So now they're going to have HC input into the road design on the other side of Fitton field!

Reverse Pilot payments by any other name.......or maybe this Mc Keon Rd upgrade is part of the 1st leg of an access road. The conspiracy theorists are everywhere.

Anonymous said...

"...Cut Project in half..."

Does this count as a bris?

Anonymous said...

I am sorry to say I am beginning to lose faith that Worcester will ever rise and succeed....the folks in charge either don't care or are completly incompetant. This is sad for the future of anyone living in this area. Talk about missing the boat! A miracle is about the last shot as I see it...

Its really can be summed up in one word....SAD.

Makes me regret I moved out this way when no one seems to give a crap about the future of this region.

Thanks to everyone who does care on this site though....if only more people cared like all of you!

-Brett

Anonymous said...

Bret:

Don't give up just yet, remember every mid sized city in the New England and/or Rustbelt is facing these same issues... a little leadership and the right break can turn things around quickly, just look at Providence. Don't throw up a 'For Sale' sign just yet, Jahn might be running for governor someday!

Harry Tembenis
Worcester, MA

PS...if Jahn was to run for office, could we name him ala Arnold Schwartzenegger ...'The Governator" ...we could call Jahn ...the "JAHNitor" ....please refrain from throwing any tomatoes my way for that one!

Bill Randell said...

Guys:

I would not be in complete despair over this, since some of these things were beyong "worcester". The real estate market, the economy , etc.

What bothers me about our leadership, however, is that if you were to say something along the lines "city square is stalled right now", you would be called "negative" or a nay-sayer versus speaking the truth.

I would just like to see little more realism. Bottom line is that "it is what it is"

Bill

Anonymous said...

I hear your despair Brett.


Could Worcester residents be ready to stampede in mass like at the end of "Animal House" when the Kevin Bacon character gets trampled stating "All is well, All is well!!!!

Anonymous said...

Part of the problem may also be the charter. Councilors are not told what is going on, the Mayor has no real authority. In addition,it never helps that deals seem to be made behind closed doors in spite of their going through the motions of a faux public meeting process.

Anonymous said...

Thanks to Swissport being featured in the 1/23/08 Telegram and Gazette article "Taking Off".

It appears they've been a catalyst in keeping our airport progressive and vibrant

Bill Randell said...

Gee, I wonder who put this post on about how great Swissport is??

How funny..

Anonymous said...

Anonymous, dont you meant ...ATTEMPTING TO KEEP.....our airport progressive and vibrant. Sorry, but I say this b/c I would hardly describe the airport as progressive and vibrant.

Does anyone think that if I opened a large private, for profit business downtown and wanted to have 2 Zip car parking spaces on the street in front of my business for my customers or employees use, that the city council would just vote me 2 dedicated parking spaces. The coucil would put me through the ringer for even attempting to hi-jack 2 parking spaces.

How the hell does the council continue to beat the drum for pilot payments, then pull this stunt? Mass College of pHarmacy s/b paying the city for these spaces at teh very least. I would have told the College to park them at the parking garage and pay jus tlike my customers& employees have to. Why should the city be subsidizing the college and Zip Car by handing over 2 parking spaces gratis?.


Too many freebies for all therse non profits. Council continues to talk out of both sides of their collective mouths when it comes to non profits and what we give away to them.


Is there such a thing a Zip Planes and if so can we get them to Worc Airport?

How did a T&G reporter just happen to be at the airport on Friday when that big bird came in? Hardly a mere coincidence IMO. Someone either called and gave T&G a heads up or a reporter was given some marching orders???

Bill, I think you should have gotten a mention in that article as an airport promoter/supporter

Anonymous said...

Happy 23rd day of JAHN-uary everyone !!!


Harry Tembenis
Worcester, MA

Anonymous said...

I'm glad to see the zip car concept in the city..this concept is very popular in hip happening urban environments..college kids love the concept as does the crunchy granola crowd..

Anyone see Jim McGovern grilling Fed Chief Bernanke last week..wanted to know if a massive food stamp program would be part of a stimulus package..no wonder why Worcester has become such a haven for so many non-contributors

No surprise Jim supported Deval Patrick..Patrick wants to bring even more Sexy 8 certificates to Worcester..just what it needs more certs for non-contributors

I haven't given up..BUT I may be moving back home to Somerville and just go back to renting my three residential properties in the city..to many pols in this city who never made a buck making to many wrong financial decisions on important stuff..not enough pols living in the urban core of the city...like in Boston..I'm tired of hearing Jordan Levy talk about how he used to live on Vernon Hill..powerful Boston pols stay in the neighborhods..in Worcester they all move to the west side and I think this is huge reason why the urban core of the city sucks and has been over taken by so many non-contributors