Tower’s Viability Questioned, Developer Wants $15M in RI Subsidies & Tens of Millions from Prov
Wednesday, July 26, 2017
A consultant hired by the I-195 Commission picked apart the proposed plan by New York City developer Jason Fane to build a residential skyscraper tower in Providence, questioning the developer's assumptions -- and viability of the project -- before the commission voted Tuesday evening for the project to move forward.
The battle between the analysis by the consultant hired by the state agency and the developer was just one of many points of contention during the nearly three hour meeting of the Commission, with union bosses turning out in support of the project, and potential neighbors and concerned residents questioning the size and scope of the project.
Latest at 195
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTAfter first proposing three mixed-use residential towers in the fall of 2016, before scaling down the proposal to one, the developer is asking for upwards of tens of millions is subsidies from the state and tax abatements from the City of Providence.
The total project cost is now about $200 million, said Chair of the Commission Joe Azrack in his comments during the meeting. But, later Jeff Padwa the attorney for the project said the total project cost is now $220 million.
The project costs were originally claimed to be $400 million to $500 million when the project was first announced. Back in November of 2016, Fane explicitly did not outline any request for any incentives.
According to RESGroup, a real estate consulting group, the proposed project has a range of issues including the timing of construction, the number of proposed rental units, the cost of construction, and the fact that the project is proposing to build expensive oversize units in which there is questionable demand.
Fane bristled at the report issued by RESGroup. “Time remains the biggest risk — the longer it takes, the less control we have over market and interest rates. On June 12, I gave [the 195 Commission] a document that clearly defines the sources and uses of funds — we strongly dispute the RES report,” said Fane.
He went onto criticize the process, “If anyone tells you otherwise, disregard their pathological pessimism. We either trust each other or we don’t.”
Consultant's Concerns
"In terms of return on cost, [Fane's] estimate was 6.99 [percent], ours (in analyzing the project) was 4.71. Depending on location and level of risk, the institutional investment market considers an acceptable range of 6.2 to 8 percent. The developer's estimate on their own falls in that range, but we feel those [Fane’s] assumptions are optimistic,” said Patricia Adell, Managing Partner of RESGroup
Despite RESGroup’s red flags, the I-195 Commission voted 5 to 1 to approve this step of the Fane project. Melissa Husband was the only member in attendance who voted against the approval.
Husband is executive director of Community Action Partnership of Providence and an adjunct professor for Roger Williams University’s SCS Community Development Program.
Now, nine months after the project was first proposed - and a project that has been scaled down from three massive towers to just one - Fane is looking for a number of taxpayer supported subsidies including the maximum allowable from RI Commerce’s Rebuild RI fund. Fane announced he wanted the full $15 million.
Beyond the $15 in state subsidies, Fane is asking for tens of millions in tax abatements from a tax stabilization. Fane is seeking a 20 year tax stabilization for the project.
Many More Hurdles
Today’s vote by the I-195 Commission is just one in a number of hurdles for the project.
Fane’s tower needs to gain approval from the city of Providence for a height variation. “The current [height] limit is 130 feet. We’re looking to go higher - we would need a change of the city ordinance, [which would take] 5-6 month months,” said Padwa, Fane’s Attorney is the former Providence City Solicitor.
In addition, the proposed tower will need RI General Assembly to pass a new configuration for the parcel that the tower would be located, and any requests for funding subsidies such as the Rebuild RI.
According to Commerce, Rebuild RI can be used, “If a real estate project cannot raise sufficient funding, or is at risk of locating in another state, Rebuild Rhode Island can fill the financing gap with redeemable tax credits covering up to 20% – and, in some cases, 30% – of projects costs.”
Public Comment Broke Neighbors Opposed and Unions For
Approximately 20 spoke during the public comment period and most of the activist and neighbors testified against the project. More than a half dozen union officials testified in favor of the project.
Greg Mancini of Build RI said this is about economic development for the city and if the 195 Commission doesn’t go to level 2, "this will make other projects wonder they’re not worthy of the 195 Commission. I heard about the uncertainty of the project, but based on Fanes’ resume thats prima facae this is a viable project."
But, while trade unions endorsed the project, neighbors criticized the size, scope, and cost to the taxpayer.
"I oppose this project ... my concern is how it interacts with the park, it would not just encroach, but it’s a building design that takes away from the ethos of what we’re trying to build…centered around a beautiful waterfront park. You don’t often find best. Spaces in the shadows of parking garages," said Sam Bell. "We’re only going to get better offers as we bring more and more buildings online. We’ll get a much better offer…to rush into a poorly planned project is to lose out. Yes, Providence has a demand for housing, but not at the high end this project is aimed at. We’ve had very few affordable units — flooding with another group of high end units."
Related Slideshow: Reactions to Fane’s “One Tower” Proposal on 195 - December 9, 2016
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