Will 3 Towers on 195 Land Kill Superman Building’s Future for Residential?
Wednesday, November 16, 2016
The new three tower proposal unveiled this week on the 195 land might transform the skyline of Providence, but if realized it also might kill any chance that the dormant Superman Building has for any future life as apartments.
According to the spokesman for New York developer Jason Fane’s proposed mega-project on 195 land, the towers could house anywhere between 800 and 1,000 new residential units.
This would be a massive addition of upscale housing to the market. Correspondingly, if the project moves forward it could likely be the end of the Superman Building’s future as residential.
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In 2014, when Superman Building’s developer was proposing transforming Rhode Island’s tallest building into residential use, a number of leading economists and business leaders raised concerns about the market's appetite to absorb the influx of high-end housing.
“The residential units proposed in the Superman Building, when completed and with the extra charges added to the rent or sale of the unit, will not be affordable to most Rhode Islanders. Most of these units will remain empty for years,” said Dr. Edward M. Mazze, Distinguished Professor of Business Administration at The University of Rhode Island, at the time.
“The city should not fund housing projects by providing special deals. Government officials should not be dazzled by slick presentations, pro-forma financial statements, models of the construction project and promises of the future. If the project makes economic sense, private investors will put in their money because of the returns they will receive. Providence can then collect the taxes it needs to support city programs. If the project makes no economic sense, the builder will go to the government for funding or relief and Providence taxpayers will get hurt,” added Mazze.
At the time, Superman’s developers were asking for upwards of $35 million in state support, above and beyond tens of millions in federal tax credits and tens of millions from the city of Providence in tax stabilization.
Mazze also told GoLocal at the time, “During the next five years, the growth in good paying jobs in Rhode Island will be for jobs located outside of Providence. The real need for housing in Providence is for families needing affordable housing and students attending colleges in the city. This market, unless subsidized by tax credits or other government support, is not as profitable for builders as is constructing higher priced residential units,” Mazze said.
“Even though Providence tries to portray itself as a great place to live, many of the amenities that city dwellers want do not exist. Residential building projects with more than ten units in Providence are extremely risky.”
Whether those words are true two years later can be argued. Certainly, there has been little significant economic develop during this period that would change Providence’s fundamentals.
Still Empty and Competitors Emerging
The three towers proposal according to the developer may cost $400 to $500 million and the level of public subsidies from the 195 Commission and tax breaks from Providence are an unknown at this time.
“Right now Boston has 11 towers over 35 stories. You need iconic buildings -- this is [Lane's] vision for coming to Providence. Does the tallest one have to be be 55 [floors]? I can’t tell you,” said Dante Bellini of RDW Group who is serving as the project’s spokesperson.
For Providence, the only other project proposed like this was the ill-fated hotel and apartment tower.
One Ten Providence had a number of iterations, but it was supposed to be Providence's biggest boldest development project in the city's core. Condos with price tags ranging from $500,000 to $1.5 million and a W Hotel. Today, it is a parking lot between the backside of the Turks Head Building and the Arcade.
On Tuesday, Providence City Council President Luis Aponte shredded the proposed towers calling it "insulting" -- and not the best use of the property for the city.
"I think the renderings show that [the proposal] is out of scale, size, and shape," said Aponte. "It's an insult to our city's historic character."
The Fane Organization presented to the proposal to the 195 Commission on Monday.
"I urge that clearer thinking prevails," said Aponte. "I understand that we are seeking development and support that, but I think we must hold fast to the belief that not all development is good development."
Is Superman Still in Play for PayPal?
The Superman Building is one of the locations that has been under consideration as a location for a regional office for PayPal. In September, GoLocal reported:
PayPal's future in Rhode Island is clearly an unknown, but the Superman building may not be the location of choice for the estimated 60,000 square feet that the online finance company needs.
PayPal, founded by Tesla's Elon Musk and super Donald Trump supporter Peter Theil, is red hot and is seeing tremendous growth. In its latest financials, the company reported revenue growth of 15% to $2.650 billion for the quarter.
According to Commerce Secretary Stefan Pryor in an interview with GoLocalProv.com, “We in Commerce organize visits to some of our key properties, and in the case of this company, we've helped to facilitate visits to properties across Rhode Island. There are multiple properties in consideration.”
Questions About the Amount of Incentives for Developers
With a range of massive projects in the mix, there are questions of how much the state can afford in subsidies and how much Providence can afford to write off taxes for ten to twenty years.
"There was the Providence Foundation effort to try and get downtown projects to be considered for administrative tax stabilizations. That was not included in [in the City Council's] ordinance.The Governor did put in [money] for Commerce for some incentives for downtown and elsewhere," said Aponte.
"If a project can only happen but for a tax stabilization, then Commerce will pay back [to the city] a portion of what the developer gets for a tax stabilization. That’s what we did for the hotel on Fountain Street, the old Fogarty Building. It’s a percentage of the difference of what the city would have gotten at the full tax rate and the stabilized rate. The city would receive a percentage of the difference, I recall it being around 10%, but you would have to check," added Aponte.
The former head of the Rhode Island Public Expenditure Council and now the Executive Director of the Hassenfeld Institute at Bryant University has called previous requests for public financing for Superman a lose-lose.
Gary Sasse has repeatedly suggested seven conditions be implemented to any consideration of the project.
For the taxpayers to be asked to subsidized redevelopment of the building, Sasse said Superman due diligence by the General Assembly and City Administration should prove the following beyond any reasonable doubt;
1. The business plan demonstrates there is a robust market for the contemplated use of the Superman Building.
2. The business plan identifies when the venture will result in a return on investment.
3. The owners provide collateral to secure any public expenditure or subsidy.
4. The owners underwrite a realistic share of Kennedy Plaza redevelopment efforts. (In their proposal, High Rock shall contribute $50,000.00 annually into the fund for a period of ten years – $500,000 total – to help fund organizations such as the Downtown Providence Parks Conservancy for the maintenance, enhancement and programming of Kennedy Plaza.)
5. The property tax stabilization be for a defined period with programmed reduction over the life of the stabilization agreement.
6. The City show how the investment in the Superman Building fits into an overall downtown revival strategy.
7. Funds are identified to build an appropriate public infrastructure as well parking.
Related Slideshow: 3 Towers Proposal for 195
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