Commercial Real Estate Sections

Progress Report

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]

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