Tue April 30, 2013
Speaker Fox Pours Cold Water on Superman Building Owner's Quest for 39M in State Help
HR&A Advisors of New York is out with its economic-impact report on the now-vacant Superman Building, which was prepared for Cornish Associates.
According to a news release, the owner of the building, High Rock Development, is proposing a redevelopment plan that includes "an owner investment totaling $70 million, including $53 million in new cash equity and debt; a 17-year tax stabilization agreement with the City of Providence of $10 [million] to $15 million, federal historic tax credits of $21 million; and state support of $39 million."
House Speaker Gordon Fox is pouring cold water on the developer's quest for almost $40 million in state help with this statement:
“The ‘Superman’ building is a beautiful and significant landmark in downtown Providence, but I am deeply concerned about the amount of taxpayer dollars that are being sought for this project. As was announced last week as part of our economic development package, the House is introducing historic tax credit legislation with a $5 million cap on credits for any single project. If this tax credit program is reinstated this year, the developers could apply for those capped credits. Beyond that, I believe the state is not in any position to provide the level of financial assistance that the developer is seeking.”
High Rock wants to convert the Superman Building into 278 rental apartments ranging in size and price, from $1,125 to $2,750 per month. The plan includes 33,000 square feet of space for shops, restaurants, and professional offices on the lower floors.
The level of legislative support for helping to reuse the Superman Building is a key question in the aftermath of the failure of 38 Studios.
Highlights from a summary on the economic impact report:
-- While the departure of a single-occupant commercial tenant from 111 Westminster is a substantial loss for the City of Providence and State of Rhode Island, it also presents a significant opportunity to build on the downtown revitalization momentum by adding a critical mass of new housing. This approach is aligned with national trends driven by shifting demographics and residential preferences favoring urban, walkable residential development and where businesses are increasingly following talent to these locations.
-- The relocation of Interstate 195 … its success depends upon continued investment in downtown. Knowledge-based companies with highly educated workers are demonstrating growing preferences for urban, walkable live/work locations. Providence already has many of the building blocks to be this type of desired location, but must provide more downtown housing opportunities to be a competitive location for these types of companies.
-- If this building is not converted to residential use, it will unload over 350,000 square feet of Class B/C space on the Downtown market, where vacancy is already 19 percent. It could take over 25 years to absorb this space.... The end result would be two or more decades of a depressed office market in which tenants would cycle through existing buildings trying to find the best deal.
-- Changes to the economy make office absorption of this type and magnitude extremely challenging and potentially detrimental to the City... The resulting supply shock would have a long-lasting, negative effect on property values in the broader downtown market, with landlords having to lower rents as they compete to fill empty space.
-- Residential use will generate substantial economic benefits to the City of Providence and State of Rhode Island. During the 30-month development period:
Project construction would generate a total of $159 million in one-time economic spending. This includes an estimated $98 million in direct spending on construction-related activities and $61 million in multiplier spending across a range of industries. Project construction would support 1,095 full-time equivalent (FTE) job years. This includes 645 full-time-equivalent (FTE) job years in construction and related industries and 450 multiplier jobs in a range of industries. Project construction would generate $44 million in employee compensation. This includes $25 million in employee compensation from direct jobs and $19 million from multiplier jobs.
-- At full build out, the Project will generate substantial impacts on an annual basis. Impacts include:
The project would generate over $25 million in economic spending from households and building operations. This includes $3.7 million in direct resident retail spending, $11.8 million in direct operational spending, and $10.2 million in multiplier spending. The project would support a total 230 FTE jobs. This includes 104 direct on-site jobs in retail, property management, and office-using sectors of the local creative economy. The project would generate $8 million in annual employee compensation. This includes over $3 million in direct compensation to workers employed on-site.
-- Further, the Project will generate substantial fiscal benefits to the City and State. These will include:
$4.6 million in tax revenues to the State of Rhode Island during construction. $680,000 in annual revenues to the State of Rhode Island through sales and income taxes. Over 20 years, the Project would produce a total fiscal benefit to the State of Rhode Island of $12.8 million in net present value terms.
-- In addition to Providence itself, many cities across the country are using housing-led economic development strategies to revitalize urban centers. These projects include new development as well as conversion of former industrial, retail, as well as office spaces. The attraction of new residents is contributing to new downtown retail spending, visitor attraction, and other spinoff activity.
-- While the Knowledge District is focused on employment growth, its success is dependent upon the provision of attractive housing and amenities for new workers and Providence residents. A December 2011 article in the New York Times noted that Hasbro chose to expand to Providence because young employees … “preferred an attractive, urban environment”
-- Adding another 265 households downtown will help enhance retail spending and increase safety through more foot traffic. This would build on the existing trend in Downtown Providence with the addition of nearly 500 units since 2000... The recent growth in downtown residential is not just a local trend. Nationally, there is growing demand for downtown development in cities across the country based on market factors and the recognition that to succeed, 21st Century cities need to offer a mix of activities and product types.
This post has been updated.