Is Fane Tower Still Viable as National and Local Real Estate Markets Change
Wednesday, September 04, 2019
For nearly three years, the proposed 46-story Fane Tower on the former 195 land has been meandering its way through a complex web of Rhode Island’s overlapping regulatory structures that have included city, state and the 195 Commission
While Jason Fane’s project continues before the 195 Commission review, real estate markets are changing.
Across the United States -- and including in Providence, Rhode Island -- there are indications that the high-end real estate market has peaked and is now showing signs of retraction.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTAccording to the Wall Street Journal, “Now, amid a maturing property market cycle and rising uncertainties in geopolitics and the global economy, foreign investors have sold more U.S. commercial real estate than they bought in a quarter for the first time since 2013.”
“After years of amassing huge portfolios, investors from abroad sold $13.4 billion of property in the second quarter of 2019, according to data firm Real Capital Analytics. During the quarter, foreign investors purchased $12.6 billion of real estate,” reports the WSJ.
In Providence, one of the top residential real estate experts, Sally Lapides, CEO of Residential Properties, says she worries that the project is too big, too many units. “I think it is too many units for the demand whether it is condos or rentals.”
When asked if the Fane project is still economically viable in this changing economy Cara Cromwell, a political consultant who serves as a spokesperson for the 195 Commission, said, “This is a better question for the Fane Organization.”
“The Commission takes a variety of factors into account at the initial stages of the process - including viability and market considerations. However, at this stage in the process, questions of viability are best addressed by the developer and its financiers,” said Cromwell.
As to whether the ongoing review process has damaged the economic viability of the project, Cromwell said, “Each project is unique with its own timeline.”
Jim Malachowski of RDW Group and the spokesperson for Fane told GoLocalProv on Tuesday, “Mr. Fane is full speed ahead.”
According to Malachowski, the project will be a mix of rental and condo units.
195 Commission Design Review
Presently, the Fane Tower is under design review by the 195 Commission. Malachowski said, “We are waiting for the 195 commission to complete the design review process. We are working with their architectural consultant to get approval. The focus has been on the streetscape and how the project works with the new park.”
The 195 Commission has hired Boston architectural firm Utile to review and conduct feasibility studies on proposed projects. Utile is paid on a scale of $80 an hour to $405 an hour for a range of review activities.
Too Much Product?
In Providence, there are a plethora of new apartment units coming on the market. The Edge at College Hill developed by Vision Properties of Pennsylvania has been deemed “not viable” by the project's former top marketer.
The former Vice President of Marketing and Leasing Joel Burton for the new apartment tower at the bottom of College Hill — which was approved by the state to receive millions in subsidies from Commerce RI and millions in tax breaks from the City of Providence in a tax stabilization — tells GoLocalProv that he believes the project is not economically viable, after he saw tenants leave after just one year when rents were raised.
As Fane is proposed to be both rental and condos, it is difficult to analyze its viability. Trends are shifting tied to global investment issues and local inventory availability.
"We have not seen a drop in high-end rentals in our listing inventory. Generally, the lower the interest rates are and the stronger the market is, the demand for rentals always decreases," said Lapides.
But, according to the Wall Street Journal, "European and Canadian investors have been active sellers recently, along with some high-profile investors from China. “U.S. real estate is priced very high right now, and people think we’re close to the top of the market,” said Matt Posthuma, a partner in Ropes & Gray’s asset management practice.
The waning appetite of foreign investors for U.S. property contrasts with their intensifying interest in other asset classes.
And Providence has a number of new developments that are coming online.
There is River House — an apartment complex with 174 units and 270 beds of graduate, medical and undergraduate student-focused.
At the base of State House, another apartment complex — the Commons at Providence Station with 169 units is now opening.
And there is more, Chestnut Commons is in construction, 1290 Westminster will open this fall and other projects are in construction now.
