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Arts Initiative Strives to Breathe New Life into Springfield’s Central Business District
Evan Plotkin and Annie Waters in the soon to be “activated” courtyard at Morgan Square. At top, one of Waters’ sketches of what the rejuvenated block would look like.
Evan Plotkin needed both hands as he gestured to various components of the spacious courtyard within the Morgan Square apartment complex in downtown Springfield — the ornate clock, the large shade trees, the walkway to the back door of the deli that’s been closed for nearly a decade, and an alleyway that would connect the courtyard with Main Street, except the gate at the front is always locked.
“It’s a beautiful area, but very underutilized,” said Plotkin, president of Springfield-based NAI Plotkin, which recently won a contract to manage the property. “It’s asleep … and we need to wake it up.”
He would use similar language as he discussed other aspects of the massive Morgan Square/Armory Commons complex — including a host of vacant storefronts, another courtyard behind a building along Taylor Street, and a traditionally large inventory of vacant residential space — and other properties in that section of downtown.
The word he used most often, and pointedly so, as he talked about various properties and assets was “activate.”
That’s what he intends to do through the expansion of an ambitious project he calls the “downtown revitalization through the arts” initiative, which, as that name suggests, attempts to use the arts as an economic driver to change the look and feel of that part of Springfield. There are many moving parts, but the concept is fairly simple — to incentivize artists to live and work in that area, and to provide them with vehicles for showcasing — and selling — their work.
Plotkin is quite optimistic about the prospects for the Morgan Square property, which would be rebranded as the “Art Space at Morgan Square,” because he’s already conducted a good amount of ‘activation’ in other buildings managed by NAI Plotkin, and with considerable success in his estimation.
He pointed to 1350 Main St., the office tower also known as One Financial Plaza, as an example. There, a long-dormant fountain has been restored, a café has been opened on the ground floor, the lobby’s walls have become artists’ galleries, and a small patio area has become a venue for performing artists. These changes and added amenities have no doubt contributed to a higher occupancy rate and success in turning on the lights within several previously dark floors, said Plotkin.
The lobby at 1550 Main, rebranded as the 1550 Gallery, is one of many locations downtown, where artists can now display their work.
The Morgan Square project represents the latest and most comprehensive activation effort to date, said Plotkin. Based on models created in Pittsfield, North Adams, Washington, D.C., and other communities, the arts initiative calls for attracting artists to the vacant retail spaces in Morgan Square through reduced or forgiven rent, and using downtown office buildings, such as 1550 Main, One Financial Plaza, and others, as well as perhaps the downtown hotels, as galleries to showcase the art.
The broad objective is to use the arts to create energy in the downtown and make it a true destination, said Plotkin, who has spent the past several years advancing his theory that the creative economy is one of the keys — and perhaps the key to revitalizing Springfield’s central business district.
“This is the culmination of a lot of thinking, a lot of thought about the creative economy,” he said. “It’s a chance to really make something happen in the city; I almost look at this as the great Springfield experiment.”
Works in Progress
Plotkin told BusinessWest that the arts initiative amounts to a manifestation of a philosophy that defines the Plotkin company’s approach to property management.
“While most management companies can perform the perfunctory physical aspects of managing the property, our approach also focuses on improving the quality of life and experience for the individuals who live and work downtown,” he explained. “This is achieved in part by programming events, and improving downtown parks, neighborhoods, and other public places.”
The Morgan Square initiative contains all these elements, said Annie Waters, a Smith College student, artist (some of her work is currently hanging in the lobbies at 1550 Main), and summer intern at Plotkin who nonetheless has her own business card, complete with the title “chief imagination officer.”
Waters has been involved in many arts-related projects over the past few months, including a proposal to use scrap metal from Springfield junkyards to create industrial- history-themed sculptures — depicting the Duryea brothers’ car, the monkey wrench, and other Springfield firsts — that would be displayed at 1350 and 1550 Main St.
But most of her time has been spent blueprinting a plan of action for Morgan Square, an initiative aimed at removing those ‘Now Leasing’ signs from storefronts (some of which have been in the windows for years) and otherwise activating dormant or underutilized properties.
The broad goals are to inspire more artists to live and work in the complex, she explained, adding that the endeavor is modeled after a number of successful programs, such as Mather Studios in the Penn neighborhood of Washington, D.C. The 10-floor building has 50 loft-style condos occupied exclusively by artists, and it has become a destination, not simply a mailing address.
Moving past images from D.C., North Adams, and Pittsfield on a Powerpoint presentation she’s shown to many in the area, Waters stopped at images of the vacant storefronts in Morgan Square. Outlining the plans for the complex, she and Plotkin said these commercial spaces will be offered at reduced rents to qualified artists.
There will be a lottery of sorts, said Plotkin, noting that applicants must complete a questionnaire and impress those reviewing them with answers to such questions as ‘how do you plan to utilize the studio and gallery space if accepted?’ and ‘how do you plan to actively participate and contribute to the creative economy at Morgan Square?’
Other components of the initiative call for development of a restaurant/coffee shop (probably on the site of the former deli) and reactivation of that aforementioned courtyard through outdoor seating for the restaurant, decorative lighting, sculpture, art, and music.
In addition, the apartments would be marketed to teachers who work in the city’s public schools and Baystate employees working at 1550 Main. “The goal is to develop market-rate apartments that will attract talented professionals to housing in downtown Springfield,” he said. “The new workforce and talent pool will eventually attract site selectors and new businesses downtown.”
Still another component is to create gallery space in the downtown’s office buildings and perhaps its hotels, said Plotkin, adding that the overarching goal is help artists and their ventures become more economically viable.
“What we’re trying to do is offer artists living space, studio space, and gallery space,” he said. “They need all three to be successful.”
Plotkin told BusinessWest that he’s optimistic about the plans for Morgan Square, and this positive outlook is fueled by what has transpired at 1350 and 1550 Main St., but also by other developments currently unfolding or on the drawing board.
These include the ambitious development projects launched by the New England Farmworkers Council and its president, Heriberto Flores — the expanded portfolio now includes the Hippodrome and the Bowles Building (home to the Fort restaurant), across Main Street from Morgan Square — and the planned redevelopment of Union Station, which can be seen out the windows of some of the apartments.
“If I was a single person and an artist, I couldn’t think of a cooler place to do my work,” he said, expressing the hope that others will be saying such things in the not-too-distant future.
Brush with Fame
Time will tell how Plotkin’s great Springfield experiment, or at least the Art Space at Morgan Square component, shapes out.
But he believes that in time, and probably not much of it, the project will become a poignant symbol of how the creative arts have helped revitalize the downtown area.
Always the optimist, Plotkin said there is already plenty of evidence that the arts can improve the experience of working and living downtown, and he’s energized by the prospects of creating more.
“This is a very exciting project for Springfield that could really change the feel of this area,” he said, while standing in the Morgan Square courtyard. “All we have to do is activate the many assets we have.”
George O’Brien can be reached at [email protected]
O’Connell Development Envisions Mix of Uses for Sprawling Complex
The former Westinghouse Electronics complex in East Springfield was slated for redevelopment into a large retail Mall, with perhaps two dozen stores, but then the recession sent that sector into a deep tailspin and eventually scuttled those plans. The O’Connell Development Group, creator of Holyoke Crossing in Holyoke, among other area retail complexes, acquired the property last fall, and is advancing plans for a mixed-use facility — although there is uncertainty about what that mix might entail.
As he talked about the sprawling former Westinghouse Electric manufacturing complex off Page Boulevard in East Springfield, and the prospects for redeveloping it, Andrew Crystal drew a number of comparisons to another project orchestrated by the Holyoke-based O’Connell Development Group, which he serves as vice president.
That would be the transformation of the former H.B. Smith boiler plant in the center of Westfield into a massive Stop & Shop supermarket and accompanying parking lot.
“That was a large industrial site that was demolished, cleaned up environmentally, and then turned into a retail location,” said Crystal, adding that this is the plan for the Westinghouse site, located just off I-291, as well. Actually, it’s been the plan for some time, and the fact that the 40 or so acres in question are still home to several buildings in the process of being razed points up a big difference between this initiative and the one in Westfield.
The H.B. Smith project unfolded in 1997, when the economy was humming and most major retailers were in an aggressive expansion mode. A planned transformation of the Westinghouse site into a $45 million retail complex with a mix of stores, undertaken by Newton-based Packard Development, was put on the drawing board more than three years ago, or just before the start of the worst recession in 80 years.
That downturn prompted the closing of thousands of retail establishments across the country and back-burnered a number of projects like the Westinghouse endeavor, said Crystal, adding that, while the retail sector is still reeling from the downturn in many respects, that segment of the economy is expected to eventually recover. Meanwhile, the Westinghouse complex has that most precious of real-estate qualities — location.
These factors and others prompted O’Connell Development, one of the O’Connell companies, to acquire the complex for $4.2 million last November and quickly commence with the process of razing the many buildings and cleaning up environmental contamination.
Andrew Crystal says retail is one promising possibility for the site, although the sector isn’t as healthy as it once was.
For this issue, BusinessWest takes an indepth look at the prospects for the Westinghouse property, identified as one of the key economic-development priorities in the City of Homes and a big piece of the ongoing revitalization puzzle.
Back to the Future
In its heydey during World War II, the Westinghouse Electric complex, opened in 1915, employed as many as 7,000 people in the manufacture of white goods and other products. The plant was part of a large industrial corridor where Rolls-Royces were once assembled and Smith & Wesson later became a huge part of the landscape.
The Westinghouse operation eventually wound down in 1970, and since then the cluster of buildings has become home to a number of warehousing and distribution tenants, said Crystal, adding that the site has long been considered an attractive location for a retail center, given its size and location only a few hundred yards from the East Springfield exit off I-291.
And in early 2008, Packard Development, a subsidiary of New England Development, which has developed a slew of retail centers across the Northeast, including several in Eastern Mass., put plans on the table for such a center, one that would be home to perhaps two dozen stores and a total of 450,000 square feet of retail. Formal plans were submitted, an environmental impact report was filed with the state (addressing, among other things, traffic issues), and the company met several times with neighborhood residents to hear and address their concerns.
All systems appeared go, but then … the recession hit, and the East Springfield project, like many planned retail developments, was first delayed and then scrapped.
“New England Development is a good firm, and they had a pretty aggressive development plan — they just got caught by the recession,” said Crystal. “It was a time when even the big national retailers were pulling back, and some didn’t make it through the recession; there were many casualties.”
But O’Connell saw enough potential in the property to make that $4 million roll of the dice last fall, said Crystal, adding that he considers this property to be a gamble well worth taking, considering the site’s size, location, and potential for a number of possible uses.
Crystal told BusinessWest that demolition will likely be concluded by the end of this year, clearing the way for what he calls mixed-use development, “although, at this point, we’re just not sure what that mix of uses is or would be.”
The property is zoned commercial, he continued, adding that this designation doesn’t permit some specific uses, such as a large distribution center, but does allow almost all others.
Retail is certainly at or near the top in terms of preferred uses, he said, adding that there is a recognized need for more retail in that part of the region, and dense population centers within a few miles of the site that could be attractive to major players in the industry.
But retail is still in a relative holding pattern overall as a sluggish recovery from the downturn continues, and Crystal acknowledged that many questions remain about when and to what degree the sector will bounce back.
“Retail is doing better than it was a year or two ago, certainly,” he said, “but it’s not like it was five years ago, and it likely never will be again. There are fewer national retail tenants now — the bankruptcy filings provide ample evidence of that — and the sector is still making its way back. Things are better, and consumer confidence has improved tremendously, but it’s certainly not like it was.”
The O’Connell Development Group has extensive experience in retail development, with several such projects in its portfolio, including the Westfield Stop & Shop initiative; Holyoke Crossing, its best-known retail effort, and one that has certainly felt the impact of the downturn; the Bernie’s store across Whiting Farms Road from Holyoke Crossing; and several CVS locations across the region.
Meanwhile, the company continues its work to redevelop the former Atlas Copco property just a few blocks from Holyoke Crossing and the Holyoke Mall into a retail facility; it is currently being used for distribution.
But there are several other potential uses for the Westinghouse site, said Crystal, listing everything from office space to health care services; from entertainment venues to a satellite post office. All are permissible uses under the zoning, and all are viable alternatives given the location just off the highway.
In the meantime, O’Connell is working to lease out space in the Westinghouse office facility fronting Page Boulevard, which is not slated for demolition at this time. Approximately 30,000 square feet across two floors is leaseable, said Crystal, adding that the company is still gauging demand for that space while deciding its ultimate future.
Marketing of the site will commence once O’Connell has a firmer grasp of just what it wants to do with the location and what the market will bear, said Crystal, adding that the site simply has too much going for it to remain dormant for long.
“You just don’t find close to 40 acres in an urban environment like this,” he said, “that has such close proximity to the highway and such high visibility from the highway.”
The Bottom Line
The H.B. Smith project succeeded in changing the look and feel of downtown Westfield. It removed a decaying, contaminated factory complex and brought retail — and some vibrancy — to the downtown.
Whether history will repeat itself in East Springfield remains to seen, but Crystal is optimistic that another location known mostly for what transpired in the past will have a different, and quite compelling, future.
George O’Brien can be reached at [email protected]
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Know the Rules to Avoid Any Unintended Consequences
Carolyn Bourgoin
Maximizing one’s current tax deduction for rental real-estate losses requires planning and an awareness of the maze of rules that must be considered in order to avoid any unintended consequences. Focusing on some of the more overlooked areas will help taxpayers to avoid some of the potential pitfalls in the passive loss rules.
The passive-activity-loss rules were enacted in 1986 as a means of discouraging taxpayers from investing in activities whose primary purpose was to generate losses to offset various sources of income. The PAL rules prohibit offsetting passive losses with income from non-passive activities, such as salary, professional fees, interest, dividends, or income from a business in which the taxpayer materially participates. As a result, losses from passive activities can only be used to offset income from other passive activities. If there is an excess of passive losses over passive income in any tax year, the excess loss is suspended and carried forward indefinitely, until passive income is generated or the property is sold.
One way taxpayers have tried to generate passive income in order to utilize passive losses is by leasing their personally owned commercial property to a related business. Under the passive-loss rules, it would seem that any net rental income generated by this arrangement would be classified as passive income. However, if the taxpayer materially participates in the trade or business to which the commercial building is being rented, then a set of rules known as the self-rental rules will cause the rental income to be recharacterized as non-passive.
The self-rental rule holds that an otherwise-passive rental activity will be treated as non-passive if the activity generates net income and the taxpayer rents that property to a trade or business in which the taxpayer materially participates. A taxpayer is considered to materially participate in an activity if he or she is involved in the activity on a regular, continuous, and substantial basis. This is determined when a taxpayer’s involvement falls under one of seven tests defined in the IRS regulations.
Though net rental income from such an arrangement is recharacterized as non-passive income, a loss from such a related-party leasing activity would not be subject to the self-rental rule and would be considered passive.
Due to the inconsistent results of the self-rental rule, its validity has been challenged by taxpayers in the courts. However, the courts have upheld the self-rental rules, and so taxpayers must plan accordingly taking these rules into account.
Actively participating in a rental real-estate activity may allow taxpayers to deduct a loss of up to $25,000 against non-passive income. A taxpayer will be considered actively participating if he or she makes key management decisions, such as deciding on rental terms, approving new tenants, or approving capital expenditures. The term ‘active participation’ does not require regular, continuous, and substantial involvement.
Additional requirements to qualify for the $25,000 loss allowance include owning at least 10% of the rental property (can aggregate ownership with spouse) and having AGI that doesn’t exceed specified levels.
Taxpayers may want to consider selling an activity that continually generates passive losses. Disposition of an entire interest in a passive activity in a fully taxable transaction will permit the taxpayer to deduct any suspended losses from the activity. Where the disposition is by gift, however, a different set of rules applies. First, the donor loses the benefit of the suspended losses; second, the tax basis of the transferred property is increased by the amount of any PALs allocated to such interest. In the case of a partnership interest that has been gifted, a donee must increase his outside basis by an amount equal to the donor’s suspended PALs. Thus, the transfer of an interest in a passive activity by gift does not allow the donor to take a deduction for any suspended losses associated with the property.
Qualifying as a real-estate professional is another option that should be explored. If a taxpayer qualifies as a real-estate professional, rental real-estate interests are not automatically treated as passive activities. This testing is done annually. The following requirements must be met in order to qualify as a real estate professional:
• More than one-half of the personal services performed by the taxpayer in trades or businesses during the tax year are performed in real property trades or businesses in which the taxpayer materially participates; and
• The taxpayer performs more than 750 hours of services during the tax year in real property trades or businesses in which the taxpayer materially participates.
A taxpayer does not have to work full-time in real estate to qualify as a real-estate professional. However, a taxpayer must be able to establish by any reasonable means, such as calendars, appointment books, etc., that he materially participates in the operation of a rental real-estate property in order to treat that property as non-passive. Each rental real-estate interest is treated as a separate activity for purposes of the material participation testing unless an election is made to group interests.
This article provides a few considerations for planning how to maximize passive loss deductions from rental real estate. As always, you should consult your tax advisor or legal advisor regarding applying this general information to your specific situation.
Carolyn Bourgoin is a senior manager in the Tax Division of Meyers Brothers Kalicka, P.C., a public accounting firm in Holyoke; (413) 536-8510.
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Tenants Must Beware of the Hidden Costs Often Found in Leases
Stephen Shatz
Basic rent is not the only cost. In fact, the items often labeled as “additional rent” may approach, if not exceed, basic lease payments.
Additional rent expenses such as real estate taxes, special district taxes, insurance, and other operating expenses are often charged and apportioned based on a tenant’s proportionate share of the square footage of a building. There are several items of concern with additional rent. Here are some that all business owners should be aware of, and they are often in the form of questions that must be answered:
• How is proportionate share calculated? If based on square footage, what system has been used (BOMA or other standard)? Has the space in fact been measured? Tenants should attempt to have the space measured or reserve the right to do so, and if there is a variance of say 3% of the lease square footage, the landlord should pay for the measurement, and, of course, the payments should be adjusted.
Also, are these costs to be calculated as an increase above an agreed base year and, if so, is it a calendar year or a tax fiscal year?
• Are “operating expenses” clearly defined in the lease? Are they for services provided by unrelated third parties? Not infrequently, these services are provided by a related company at costs that exceed market rates. Do operating expenses include depreciation or replacement of capital elements of the property? If they do, these costs might easily exceed basic rent.
What is of further concern is that the lease may say the landlord is responsible for capital repairs, but yet the additional rent provisions will attempt to pass on these costs to the tenant. Furthermore, tenants should reserve the right to audit all operating expenses, and again, if there is a 3% or more variance, the cost of the audit should be paid by landlord, and, of course, the payments should be adjusted.
• Tenants need to be careful in negotiating maintenance, repair, and replacement obligations. The elements of the leased premises that the tenant is required to maintain need to be carefully detailed. Avoid provisions that say the “interior of the leased premises and all elements therein” as a standard for the tenant’s obligations. This standard could easily require maintenance and repair to major mechanicals and HVAC systems, the costs of which could far exceed basic rent.
Care should be taken not to agree to “replace” the interior elements, because the cost of doing so for plumbing, HVAC, and electrical equipment could be quite high. In addition, replacement provides a windfall for landlords, because the elements so replaced easily could have a useful life far exceeding the lease term.
• Lastly, but not finally, care should be taken when agreeing to have either basic rent or operating-expense rent increased by rises in the so‑called “cost of living.” The standard measures for these increases are published by the U.S. Bureau of Labor Statistics and vary by region and by a description of the items in the shopping cart that are being measured. Energy costs and medical expenses tend to artificially inflate these indices, and every attempt should be made to use an index that does not use these highly volatile categories.
Though it is difficult to anticipate all potential hidden costs in a lease, a careful reading of the document and a successful negotiation can limit a tenant’s exposure to them and avoid unpleasant surprises.
Attorney Stephen A. Shatz, a shareholder with the Springfield-based firm Shatz, Schwartz, & Fentin, concentrates his practice in the areas of real estate development, real estate finance, and commercial leasing. He is a New England Super Lawyer in the field of real estate, 2004-present; (413) 736-0375.
Race Street Project Embodies Progress in Holyoke’s Innovation District
Martin Kane says the Race Street building that has become the Holyoke Professional Arts Center has “great bones.”
The banner gracing the front of the building at 306 Race St. in Holyoke is 25 feet wide, and it needs every bit of that length to contain all the information crammed onto it.
If one has the time and inclination, he or she could stop, read, and learn that the more-than-century-old, two-story, 18,000-square-foot building is now called the Holyoke Professional Arts Center (PAC) at Mahoney Place, with the latter part of that name referring to family members of the property’s owner, Jeff Cunningham. One could also see the creative logo for this facility, with a flywheel, similar to the ones that can be seen in the ceiling on the second floor, inside the ‘C’ in PAC.
Reading on, one could learn that the Providence Prenatal Center of Holyoke, a component of the Sisters of Providence Health System, and Tapestry Health, an agency that provides a wide range of health services to women through several locations in Western Mass., will be the first new tenants in the center. And, when seeing the name of the brokerage firm (King & Newton) handling the building — as well as a phone number and Web site — one could surmise that there is still space to be leased — roughly 10,000 square feet of it, to be more specific. Reading still further, one would note that Southbridge Savings Bank financed this endeavor, and also see some commentary in the form of a line that announces this project as “a new era in the rebirth of Holyoke.”
But while this banner tells much of the story concerning this downtown landmark and what its reuse means in the larger scheme of things, it doesn’t tell it all. Indeed, there is a lot of history to this building, and an intriguing series of developments that led to an elaborate construction kick-off ceremony on April 7, said Martin Kane, the broker with King & Newton who has handled the building for years and worked with Cunningham to give it a new start.
Meanwhile, this project is just one of several that are changing the look and feel of this section of downtown Holyoke — a few nearby buildings have been converted into artists lofts and a new convenience store recently opened — and there is the promise of much more to come.
That’s because 306 Race St. sits directly across the canal from the property that will be transformed into the Green High Performance Computing Center that is expected to fuel additional development in the downtown area, across Holyoke, and perhaps well beyond.
“We’re seeing a lot of interest in properties in that section of the city,” said Kathy Anderson, director of the Holyoke Office of Planning and Development. “We’re meeting with people and talking, and in the meantime we’re looking at what we need to do to spark private development there.”
Anderson said there are more developments — from new stages of the city’s canal walk project to the possible reintroduction of commuter rail service after a more-than-40-year absence, that could spur more progress in the central business district of the Paper City and a section now known as the Innovation District. Taken together, the initiatives are a classic case of public-sector investments designed to inspire private-sector spending.
“There’s private development happening, and that’s what we were hoping for,” she said of the Race Street project and others like it. “The Innovation District Task Force is charged with creating ways to leverage the high-performance computing center, to take advantage of it and make something more happen in Holyoke and the region because of it.
“This is just one small project taking shape across the canal,” she said of the PAC. “They’ll be seeing what’s going on outside their windows; people are getting excited about this — there’s a lot of interest in downtown Holyoke.”
For this issue and its focus on commercial real estate, BusinessWest takes an indepth look at the Race Street project and how it is just one small example of progress in Holyoke’s downtown, and evidence of that new era in the rebirth of Holyoke that the banner announces.
Building Momentum
“Great bones.”
That was the descriptive phrase Kane used at least a few times to describe the L-shaped Race Street building as he gave BusinessWest a tour of all three levels. “Rock solid” was also tossed out a few times for emphasis.
Such language was deployed to convey the sentiment that while this property has seen better days, it certainly has intriguing ones ahead of it, and has the foundation, in more ways than one, for new and intriguing uses.
Tracing the history of the property, Kane said it dates back to the late 19th century, and has housed a number of different manufacturing operations over the years. Most recently, it was home to Service Machine, an outfit that made slitter knives, which was purchased by Cunningham, a Worcester-based real estate developer, several years ago.
After that business and its equipment were moved to another facility owned by Cunningham, the property stood vacant for some time, said Kane, adding that Cunningham approached him in early 2008 to explore new options for filling the square footage.
“He asked me what I thought the highest, best use was,” Kane recalled, “ and I told him I thought it would be a good location for offices and service businesses.”
Plans to lease out the property for such purposes hit a brick wall in the form of the Great Recession, which created a huge glut of manufacturing, office, and warehouse space in Holyoke and across the region. But when Kane offered the site as a possible option for administrators at the Providence Prenatal Center of Holyoke, who were looking to trade up from space on High Street, there was strong interest.
“We explored it, and it got to the stage where there were lease negotiations, but nothing came from them,” said Kane, adding that by the spring of 2010, Cunningham was ready to put the property on the market, when the SPHS was approached one more time.
This time, a deal was struck, he said, adding that several months later, Tapestry Health, which has an office on Main Street in Holyoke, signed a letter of intent to relocate to the Race Street facility. Those two agencies will occupy the first floor of the building, said Kane, adding that the 6,000 square feet on the second floor and roughly 4,000 square feet in the lower level have a number of potential uses.
As he gave his tour, Kane gestured out an open window on the second floor to the buildings across the canal that will become the high-performance computing center, and expressed the hope — and expectation — that the much-anticipated project would attract a number of technology-related ventures to the downtown area.
“This would be an ideal site for a Web-development company,” he said of the longer leg of the ‘L,’ which has several of those aforementioned flywheels in the ceiling. “The computing center could generate a lot of interest in this space.”
The same could be said for the whole of Holyoke’s so-called Innovation District, said Anderson, adding that the HPCC is the largest of several developments that could bring new businesses — and greater vibrancy — to the downtown.
Another is the potential for the return of commuter rail, last seen in Holyoke in the late 1960s, she said, adding that the Paper City would be part of service that would run from New Haven into Southern Vermont.
City officials are currently looking at two options for a train station — the former station on Bowers Street, designed by HH Richardson, built in 1883, now owned by the Holyoke G&E, and vacant for some time, and a site for new construction at the corner of Dwight and Main Streets.
“We’re trying to get a train station up and running by the time the train goes by,” said Anderson, adding that the larger mission is to make infrastructure improvements that will connect the recently opened intermodal transporation center on Maple Street, as well as the canal walk, to that train station, wherever it is located.
Meanwhile, the canal walk project is bringing more vibrancy to the downtown area, said Anderson, adding that open studios conducted by groups of artists now located in buildings on nearby Dwight Street are creating more foot traffic in the area. One goal, long term, is to utilize a section of Race Street between Appleton and Dwight Streets for open-air festivals.
Overall, city planning officials are talking with developers now making inquiries about downtown Holyoke and its Innovation District, while also working to determine what additional steps can be taken to inspire and facilitate private-sector spending.
“We’re looking at it from the prospective of what we need to do to create more growth in that area,” she explained. “What type of public investments do we have to make in order to spur private development? We’re looking under the street, on top of the street — do we need to work on our water-supply system or fiber optic infrastructure? We’re preparing for the future growth of the city for the next 30 to 50 years.”
Positive Sign
The banner across the front of the Race Street building provides some good reading, and the expectation is that there will be more of these to appear on downtown properties in the months and years to come.
In many ways, it is a sign of the times, a sign of progress, and a sign of how public investment can spur private development — in both a figurative and very literal way.
George O’Brien can be reached at [email protected]
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Ludlow Mills Project Takes Several Big Steps Forward
Kenn Delude says that, when officials at Westmass Area Development Corp. announced their intentions to acquire the former Ludlow Mills property in July 2008, they expected that it would take considerable time to secure the financing and handle the myriad other details needed to make the complex deal happen.
And they were right.
But most of the work on this phase of the ambitious project — amassing the $13.1 million in state grants, private debt financing, and equity investments for needed infrastructure improvements, site-remediation work, and acquisition of the buildings and land — can now be relegated to the past tense, said Delude, president and CEO of Westmass. He told BusinessWest that a purchase-and-sale agreement on the sprawling complex, identified by the clock tower that has become, in many ways, a symbol of Ludlow, should be completed in a matter of months.
And then … well, thus begins the next, probably equally challenging phase — re-tenanting the more than 1.4 million square feet of existing mill space in 66 buildings and developing more than 100 acres of adjacent green space. It is in many ways the most ambitious undertaking, and certainly the largest brownfields yet, for Westmass, which celebrated 50 years of doing business last fall, and an effort that will play out over at least the next 15 to 20 years and create and retain 2,000 to 2,500 jobs, said Delude.
“We knew it would be an exceptionally long lead time, but things should move much faster now,” said Delude, who expects the property to be ready for the marketplace by early 2013.
So, in a way, the protracted acquisition and site-preparation process should actually work to the benefit of WestMass, he continued, noting that, while the economy is in recovery mode and there is some pent-up demand for distribution and manufacturing space (which is what most of the Westmass inventory is targeted for), there should be much more by the time the Ludlow Mills project is fully ready for the market.
“We’ve been below the radar in a lot of ways on this project,” he explained. “During this recession, we’ve been doing our homework on this site; this is the time to get the i’s dotted and t’s crossed, and be prepared so that, when the economy does turn around, you’re there in the marketplace with a fresh resource that is hopefully attractive enough to spur economic development.
“I’m not going to suggest that we were market-timing by any means,” he continued, “but this was a prudent use of our time and resources in this recessionary period when we haven’t seen a great deal of activity.”
Breaking down that $13.1 million, where it came from, and how it will be allocated, Delude said the key to getting things moving was the securing of more than $5 million in state grants for road improvements, other infrastructure work, and site remediation.
“And that was the catalyst for us being able to go to private lenders, area banks, for a development loan for the project, and this request was well-received,” he explained, adding that Westmass borrowed from the scripts for previous projects, ranging from the Agawam Regional Industrial Park (built on the site of the former Bowles Airport) to the Chicopee River Business Park, and sought to involve a consortium of local banks.
At present, six such institutions are involved, he continued, adding that negotiations have been finalized with all but a few.
“With their participation comes the ability to share the risk that’s involved in a project of this type,” he said. “This is the model we’ve used in the past, one in which the local lenders would take portions of a project that had strong community benefits and regional impact.”
Delude said subsurface environmental and geotechnical investigations at the property were scheduled to commence on March 21 as a final step in advance of the acquisition of the property, with that work expected to be completed in early May, putting Westmass on track to acquire the property in June. Permitting, a zone change, and infrastructure commitments will be worked on simultaneously over the next two to three months.
These infrastructure improvements include the reconstruction of State Street, which runs parallel to the property, as well as water-distribution system upgrades, bringing a natural gas line down through the property so it can be converted from oil to gas, storm drainage, sidewalks, street lighting, and other amenities.
Marketing of the complex has already begun in some forms, said Delude, adding that it will become more comprehensive over the next several quarters, and, as with all Westmass projects, it will be local, regional, national, and even international in scope, with the efforts of the Economic Development Council of Western Mass. accounting for most all of the work in the latter two categories.
And with the Ludlow initiative, there will be one unique constituency to target, he continued, referencing the approximately 30 existing tenants in the mill complex, ranging from some warehouse and distribution operations to a kitchen-remodeling business to a fire-restoration company.
“We have businesses there that we need to work with and find accommodations for, and hopefully they can be the seeds for success moving forward,” he explained, noting that roughly 35% of the square footage is occupied with ventures employing a few hundred employees. “These businesses have strong potential for us; we want to sit down with them and talk about options we can make available to them that perhaps haven’t been available. If they fit the mold, perhaps this means new construction or owner opportunities as opposed to leasing.”
Meanwhile, with the acquisition, Westmass will assume property-management responsibilities, he continued, adding that this is another new challenge for the agency and will require additions to the staff.
George O’Brien can be reached at [email protected]
Northampton Project Moves Off the Drawing Board
Northampton/I-91 Professional Center
Ken Vincunas says that considerable time and energy were devoted to coming up with a name for his company’s latest commercial real-estate endeavor.
And he considers it all very well spent.
Indeed, he believes ‘Northampton/I-91 Professional Center’ effectively conveys not only where his next project will take shape, but what it will become.
The two-building, 80,000-square-foot Class A office complex will be located in Paradise City and, more specifically, just off exit 18 off I-91, adjacent to the Clarion Inn and Conference Center, where it will be quite visible from the highway. Meanwhile, it is a facility being designed for professionals, and while the health care sector is certainly one target, he believes individuals and firms across several sectors will be attracted to this site’s combination of access and amenities.
And in time, the site will become a center of business activity, he predicts, noting that the location makes the complex accessible to points well north and south of that I-91 off ramp, and thus perfect for professionals that do business across the region.
“In the end, everyone involved thought this name captured the fact that it was in Northampton and on the highway, which are the two biggest features,” said Vincunas, president of Agawam-based Development Associates Inc., which is spearheading the project for the owner of the Clarion complex, Atwood Drive, LLC, which has assembled the needed acreage over the past several years. “There were options, incorporating phrases like ‘Mountain View,’ that were a little more touchy-feely, but we wanted to emphasize our strengths and what sets this project apart.”
He described his company’s latest venture as a ‘partial-spec project,’ meaning that work will not commence until commitments have been received for probably 60% to 70% of the available square footage. But there is some risk involved, he continued, adding that there are still some question marks concerning when and to what degree the economy will turn around in the months to come.
The professional center is the first undertaking by Development Associates in Northampton, and is the latest in a series of office and mixed-use ventures across Western Mass. The portfolio, which totals 1.5 million square feet in facilities stretching from New Haven to Greenfield, currently includes the 31,000-square-foot Agawam Crossing professional building, the 85,000-square-foot North American headquarters for Convergent Lasers in the Chicopee River Business Park, the 190,000-square-foot Greenfield Corporate Center, the headquarters for Seahorse Bioscience in Chicopee, and dozens of other single- and multi-tenant facilities.
Vincunas believes this will be a worthy addition to that portfolio and, more importantly, an economic driver for the Northampton area and the region as a whole.
Paradise Found?
Ken Vincunas says that, in addition to location, his project would seem to have timing in its favor.
Indeed, he’s also of the opinion that the timing is good, especially with regard to the laws of supply and demand. Elaborating, he said that, while the economy is still very much in recovery mode, there are certainly signs of progress and higher confidence on the part of business owners, including those in the health care sector.
“If we get the pre-leasing in place and get started soon, the timing could be perfect,” he said, citing what he considers a good amount of pent-up demand for such facilities within the health care sector and other professional groups. “We’d definitely be ahead of the curve because there’s not a lot of things being proposed for this kind of use.
“In the Northampton office market, while there is space,” he continued, “it’s mostly in the downtown where it’s hard to find parking and it can be challenging getting in and out of the center of town, traffic-wise. This gives people with a regional perspective a location that they can get to from all quarters very quickly. You can draw from all areas. You don’t have to be just a local office; you can be a regional office.”
Meanwhile, many of the office projects created for the health care market, such as a series of developments on Wasson Avenue in the North End of Springfield, near Baystate Health, are at or near capacity, said Vincunas, as are many of the rehabbed former mill buildings in Northampton, Florence, and Easthampton. And as the medical sector, one of the mainstays of the local economy, continues to grow, Class A space will be in demand.
The professional center has been on the drawing board for roughly two years ago, or since Atwood Drive LLC completed the task of acquiring additional adjacent parcels, including a former Mobil gas station and a small auto-repair venture, and assembling a parcel totaling just over four acres.
The timing certainly wasn’t as appropriate then, he noted, referring to both the economy as a whole and the fact that two major potential players, Baystate Health and Cooley Dickinson Hospital, were involved with other initiatives. Also, the project had not gone through the involved permitting process in Northampton, he continued, adding that the cart was essentially put before the horse.
“This time, we received the permitting first, so we know what we can offer,” he said, “and we know we can build it as soon as we’re ready.”
The center will consist of two buildings, one with 39,000 square feet of leasible space, and the other with 43,000 square feet. Full floors are approximately 12,000 square feet, and spaces as small as 1,000 square feet will be available.
The exterior of the buildings features a high proportion of glass, complemented by natural brick and EFIS (exterior insulation and finishing system) effects, said Vincunas, adding that the major entrances of the buildings feature a two-story glass lobby. Meanwhile, green materials and high-efficiency mechanical systems will be implemented throughout the project to reduce energy and improve overall quality.
Vincunas said marketing of the professional center has begun in earnest, and initial interest is solid and crosses several industry sectors. Pricing is currently being finalized on the shell and interior spaces, he continued, adding that these numbers will contribute to lease rates, which have not yet been determined.
Space Exploration
While Vincunas exudes confidence while discussing his latest endeavor, he noted that there are still many variables when it comes to the economy and its ongoing rebound, and that time will tell just how much demand there will be for this new supply of Class A space.
At this moment, though, he believes he has the right product in the right place at the right time.
And the name is pretty good, too.
George O’Brien can be reached at [email protected]
