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Commercial Real Estate

A New Anchor

Drew DiGiorgio discusses Wellfleet’s move

Drew DiGiorgio discusses Wellfleet’s move, backed by, from left, Demetrios Panteleakis, Dinesh Patel, Springfield Mayor Domenic Sarno, Vid Mitta, and state Rep. Carlos Gonzalez.

Tower Square has seen its ups and downs over the years, but its new owners have been aggressive about selling potential clients on the renovated space, convenient parking, downtown amenities, and simply being part of an economic renaissance in Springfield. Wellfleet took that pitch to heart, which is why it agreed to become the tower’s anchor tenant.

Vid Mitta, managing partner of Tower Square, called Wellfleet’s relocation to the downtown Springfield office tower “a big thing.”

It’s even bigger when one considers how far the company has come, said Drew DiGiorgio, Wellfleet’s president and CEO.

“When we started, it was five employees,” DiGiorgio said. “My office was not an office — it was a desk and a chair located at the bottom of the stairs at a barbershop in Wilbraham. We would open up envelopes, and I would lick them because didn’t even have the little spongy thing. We answered the phones when they rang; we did everything. To go from that to this is pretty humbling, and I appreciate everyone’s support to get us here.”

“If this was five years ago, the issue might have been safety in the downtown. But the dynamic has changed. The downtown is attractive, there are all kinds of venues and attractions nearby, and security doesn’t appear to be an issue any longer.”

Wellfleet, a Berkshire Hathaway company providing accident and health-insurance products, recently staged a press conference to announce the relocation of its national corporate headquarters — and 150 of its employees — to the 10th, 11th, and 12th floors of Tower Square in August.

Wellfleet — which has built a national niche insuring college students, handling more than 100,000 students at more than 200 colleges and universities — has outgrown its current office space on Roosevelt Avenue in Springfield. The new offices at Tower Square will give employees up to 80,000 square feet of class-A office space and provide ample room for Wellfleet’s new and growing Workplace Benefits division.

“To me, Wellfleet is a home-grown, small, Springfield-based company which has grown to this size today, and we should applaud their success,” said Mitta, who announced that Wellfleet’s name will be placed on the tower as its anchor tenant.

Rethinking the City

Demetrios Panteleakis, principal of Macmillan Group, the real-estate firm that represents Tower Square, said his team was in discussions with Wellfleet for about a year as Wellfleet searched the suburban market for a home.

“We were the alternative. They were kind of weighing it against what the suburbs had to offer,” he said, adding that he was able to pitch a downtown headquarters as much more than a fallback. In fact, the more Wellfleet’s leaders considered Tower Square, the more it made sense.

“If this was five years ago, the issue might have been safety in the downtown,” Panteleakis told BusinessWest. “But the dynamic has changed. The downtown is attractive, there are all kinds of venues and attractions nearby, and security doesn’t appear to be an issue any longer.”

In short, a thriving urban center is simply more attractive than the suburbs to many companies. But that shift in perception didn’t happen overnight.

“I think it’s a culmination of everything the folks at City Hall, the Business Improvement District, and all the economic-development folks have been working on, rowing in the same direction, for the last four or five years,” he said. “The result is not only attracting new tenants, but bringing tenants from Westfield, West Springfield, Northampton, Agawam … these are folks saying, ‘Springfield is the heart of the economic engine in Western Mass., and that’s where we need to be; that’s where our employees need to be.’”

DiGiorgio said Wellfleet employees, when asked what’s appealing about Tower Square, cited the modern, renovated space itself, with its natural light, city views, and covered parking, as well as the food options downtown and the fact that the district has been emerging economically in recent years.

“In New England, it’s not a lot of fun when the snow and rain come, so having a secure garage, and having the ease of a building that kind of provides you everything you need over the course of the day, that’s highly attractive,” Panteleakis added.

Drew DiGiorgio called Wellfleet’s new home in Tower Square “inspirational” space.

Drew DiGiorgio called Wellfleet’s new home in Tower Square “inspirational” space.

Formerly known as Consolidated Health Plans, Wellfleet branded under its current name in January, uniting its insurance carriers and claims-administration organizations under one marketing name. It boasts approximately 175 employees, 150 of whom work in Springfield; others work remotely or from satellite offices in Florence, S.C. and San Rafael, Calif.

“We believe being part of Springfield is important,” DiGiorgio said, noting that the company has long been involved in efforts like the Memorial Spring Cleanup, Link to Libraries, Friends of the Homeless, Rays of Hope, and Open Pantry. “We are active in the community. Our name is not well-known, but we think that will change in the future.”

Springfield Mayor Domenic Sarno noted that Tower Square’s owners have been aggressive and creative in bringing an eclectic mix of businesses to the facility, from Wellfleet to the YMCA of Greater Springfield to White Lion Brewing Co.

“A lot of people, years ago, said, ‘what can you expect? It’s Springfield.’ More and more people are saying now, ‘why not Springfield?’” the mayor said. “I won’t say the downtown is re-emerging as much as it is reinventing itself. Springfield is getting on the map. And my administration continues to be business-friendly because it brings jobs.”

Towering Presence

At the end of the day, Panteleakis said, Tower Square is becoming an easier sell.

“When you walk people through the space and they consider the economics of it — for a few dollars more, they can have parking at their leisure, then the level of security and the amenities a class-A building has to offer — it sells itself.”

That’s why he enjoys those tours of the building with prospective tenants, and hopes more companies and organizations request them.

“What they need to understand is what Wellfleet understands — the level of the buildouts of the existing spaces in Tower Square rival anything you’d see in Boston or New York City,” he told BusinessWest. “These are class-A, high-tech buildouts, and there’s a difference between being in a class-B or suburban market and being in a state-of-the-art, class-A office space with spectacular views of the Pioneer Valley.”

At the press conference, Panteleakis said welcoming Wellfleet was “a special day” for the city and the office tower.

“It’s quite remarkable to have another insurance company that’s growing at the rate this company is growing, and it’s only fitting it makes its home in the marquee building in the center of the city, bringing its people, its energy, and its vitality to the downtown,” he noted. “It’s just a great day to see it happen to our city. I think it’s going to be one of many great announcements Tower Square has for you over the coming months.”

Joseph Bednar can be reached at [email protected]

Nonprofit Management

Y’s Plan of Action

Dexter Johnson

Dexter Johnson says the Springfield Y’s move downtown is a significant cost savings, but there are other reasons why it makes sense.

The YMCA of Greater Springfield has had a long-standing policy: once someone has logged 50 years of continuous membership, their days of paying to work out are over.

Dexter Johnson, CEO of the nonprofit, told BusinessWest that there are at least a few dozen people currently taking advantage of this benefit, including one who recently crossed that threshold. “He was counting down the days until April 15, and kept reminding us,” said Johnson. “It’s a badge of honor for them.”

Some of those in this exclusive club can trace their membership back to when the YMCA was located a few blocks to the south of its current home on Chestnut Street, in the heart of the city’s downtown. And most all of them will be turning back the clock in a way and staying with the Y when it makes its move back downtown — to Tower Square — in a matter of weeks.

Johnson hasn’t officially polled these long-time members, but he has gathered some feedback on this move, one that has been accompanied by no end of questions concerning everything from where people will park to why this relocation was necessary, to where people might be able to swim a few months from now.

We’ll get to all those later. First, back to Johnson and those in the ‘membership is free’ club.

“We’re hoping that they stay with us through this transition, and most are keeping an open mind,” he said. “They understand that transition has to happen, it has to happen in life in general, and all businesses go through it some point. Our message to them has been, ‘just wait and come check it out; there’s no need to run somewhere else.’”

And this is the mindset — especially that open-minded part — that Johnson hopes all current members, prospective members, and the community at large will take as the Springfield Y, one of the oldest such institutions in the country, embarks on what will certainly be one of the most intriguing chapters in its history.

“We’re hoping that they stay with us through this transition, and most are keeping an open mind … Our message to them has been, ‘just wait and come check it out; there’s no need to run somewhere else.’”

The lease with Tower Square is for 10 years, and the ensuing decade will be spent exploring and perhaps implementing any of a number of options for securing long-term sustainability for the Y, a nonprofit that has struggled financially not only for the past several decades, but most of its existence, said Johnson, who has researched the matter thoroughly.

However, the fiscal picture became even darker in recent years, said Johnson, adding that the Y essentially reached a point where it needed to get out from under a half-century-old facility that had become an untenable money pit.

But while the move to Tower Square will ultimately save the Y roughly $150,000 a year, the relocation and sale of the property on Chestnut Street should be looked upon not merely as a cost-saving measure, but as a real opportunity for the agency.

Indeed, Johnson estimates there are at least 2,000 people working in Tower Square and the other office buildings abutting it, and within those ranks are undoubtedly people who could benefit from having a well-equipped gym just a few hundred feet from their office or cubicle. Likewise, there are parents perhaps looking for day-care services more convenient than the one they’re using.

Meanwhile, the Y will have a front-row seat for, and perhaps play an important role in, the revitalization of Springfield’s downtown.

“There’s a lot of activity happening downtown right now, and this gives us the opportunity to be part of that rejuvenation that’s going on,” he said.

These are just some of the ‘glass-more-than-half-full’ takes that Johnson has concerning the Y’s new home. For this issue and its focus on nonprofits, he offered much more on how and why this step was taken and what it means for this institution.

Positive Steps

As he talked with BusinessWest in his office at the Chestnut Street facility, Johnson said the Y recently received an appraisal ($1.3 million) on the building — or, to be more specific, the non-residential component, with the five-story living quarters having already been acquired by Home City Housing — and said the property will go on the market later this month.

When asked to speculate on possible future uses, potential buyers, and degree of retrofitting likely to be involved, he obliged.

“If it was a school that really wanted a pool and a basketball court, then there wouldn’t be as much repurposing to do,” he explained. “But if someone wanted to turn it into office or retail space, then obviously there would be significantly more repurposing.”

But at present, Johnson has his mind on many other matters beyond what will hopefully be a quick sale, especially the work to get the Y’s new digs, especially the child-care component, ready for primetime, meaning August by his calculations.

But before we go there, we need to go back and discuss the many factors that brought us to this moment. Recapping, albeit quickly, Johnson said a number of factors and circumstances in recent years — everything from escalating competition in the fitness business to the miscalculation that was the Y branch that opened in Agawam in 2014 and subsequently closed less than two years later, to the ever-rising costs of operating and maintaining the Chestnut Street facility — brought the Y to the point where something needed to be done, and soon.

He said a number of options have been considered in recent years, from new construction — pegged at $12 million to $15 million — to renovation of the existing structure, to retrofitting another building. But the numbers didn’t seem to work with any of them.

A different kind of option presented itself when the new owners of Tower Square — even before they actually owned the property — approached Johnson about the prospects of the Y moving there.

“There’s a lot of activity happening downtown right now, and this gives us the opportunity to be part of that rejuvenation that’s going on.”

And the talks quickly escalated to action.

“The opportunity at Tower Square was chosen because it did allow us to make a quicker move than any other options we explored,” he explained, adding that, as those talks continued, a plan emerged that would bring the old Y, or at least most of it, to two different locations within Tower Square. The childcare unit would be relocated to an area on the ground floor, formerly occupied by Valley Venture Mentors, a travel bureau, dry cleaners, and other businesses. Meanwhile, the wellness center would be located in a large space across from the Food Court, perhaps best known in recent years as the home to the Boys and Girls Club’s Festival of Trees.

The two sides came to an official agreement in the spring, and work has been ongoing at the childcare facilities and, more recently, the wellness center. Meanwhile, logistics have been worked out regarding parking — members can park for free in the Tower Square parking garage — and for the dropoff and pickup of children at childcare in a designated area created along Bridge Street.

The Y will be trading its current 85,000 square feet of space for less than half that (35,000 square feet), said Johnson, but a good portion of the existing footprint is unused or underutilized anyway, including the basketball court and squash courts, which in recent years have been put to other uses. And there are options available for adding more space in the future.

The move is somewhat unusual, but not without precedent, he added, noting that, as the retail scene changes and many YMCAs face fiscal challenges and upkeep expenses at aging facilities, some have found new homes in closed malls and supermarkets, and others, like Hartford’s, have found their way back downtown.

Space Exploration

But while a move to Tower Square was the most sensible option on many levels, it obviously comes with a good amount of risk, Johnson acknowledged, noting that the downtown location brings with it questions, challenges, and limitations.

Starting with the obvious lack of a pool.

Johnson said there are a number of members who make use of the pool at the Chestnut Street location — just how many he couldn’t say — but these individuals will certainly be among those who won’t be going with the Y to its new home.

“The question about the pool is the one that’s raised the most, and that’s a loss for us, no question about it — especially for the adults who use the pool for lap swimming,” he noted. “But for us, that’s not a huge number right now. The pool sees more activity from youth swim lessons and exercise classes happening in the pool, and we’re looking to continue those at other sites.”

Elaborating, he said the Y is exploring partnerships with a number of entities, including Boys and Girls Clubs, schools in Springfield, and other facilities.

As for the membership in general, Johnson said there have been a lot of questions and some anxiety about the move, both of which were expected. But he believes when the dust settles — literally and figuratively — most will stay with the Y.

“There are a lot of great members who have been here 40 and 50 years — we have some long-term members who are used to being here,” he said. “Once they’ve seen the renderings of what the new place will look like and they understand that it’s the same great staff … they’ll realize that, if everyone goes over, then the small groups that have formed and the friendships that have formed can continue.

“We’re not looking to change any of that,” he went on. “We’d just like to change the location and create something that’s more attractive to new membership.”

Overall, Johnson is expecting an attrition rate of perhaps 20% among the Springfield Y’s roughly 1,100 members, a number he admits is a calculated guess based on the feedback he’s received.

That’s a big number, but he’s optimistic when it comes to the prospects for recovering those losses with new members, especially from the ranks of those working in and around Tower Square, a number that will climb by roughly 200 with the arrival of Wellfleet in August (see related story, page 39).

Johnson acknowledged there are already a few gyms downtown — one at the Sheraton hotel in Monarch Place and another just a block down the street at 1350 Main St. — but none right in Tower Square. And none that have the far-reaching mission of the YMCA, where dollars spent on a fitness membership ultimately wind up helping fund a number of youth programs within the community.

He’s already reached out to those at the UMass campus located on the second floor of Tower Square and plans to do the same with Cambridge College, located on the ground floor. Meanwhile, the Y is planning a membership drive and grand-opening specials, to help spur interest in the new facility, as well as half-hour classes designed specifically for business people on tight schedules.

The Shape of Things to Come

In discussing the move to Tower Square, Johnson refrained from describing the new mailing address with the term ‘temporary,’ although he hinted strongly that it probably won’t be permanent.

“As we looked to our future, we saw this as a great opportunity for more immediate stability,” he told BusinessWest. “Our options are open to continue once we get this move done and stabilize ourselves a little bit. I wouldn’t call this ‘temporary,’ but I also wouldn’t say it doesn’t mean that we’re not going to explore standalone ownership somewhere else in Springfield down the road.”

In other words, the move buys the Y some precious time and, by all accounts, a much better chance than it previously had of putting itself on better financial footing for the short and long term.

Which means that, in most all respects, this was a gamble worth taking.

George O’Brien can be reached at [email protected]m

Features

Complex Equation

Dinesh Patel, left, and Vid Mitta in the soon-to-be-renovated lobby of the Tower Square Hotel.

Dinesh Patel, left, and Vid Mitta in the soon-to-be-renovated lobby of the Tower Square Hotel.

Both the office/retail complex known as Tower Square and the hotel that sits on the property would be considered somewhat risky investments, given their recent history. But the investment group Springfield Hospitality believes otherwise — in both cases. The new ownership group has announced an ambitious plan to get the Marriott flag back on the hotel, and it is confident about gaining a wide range of new tenants on the retail side of the equation.

As they talked about their plans for Tower Square, the downtown Springfield landmark they acquired last year, and the hotel that is a prominent part of the complex, Vid Mitta and Dinesh Patel had to be careful, even cryptic, with some of their comments.

Especially when it came to the long-rumored signing of the YMCA of Greater Springfield as a major new tenant. That deal has not been finalized, said the partners as they talked with BusinessWest following a press conference late last month on their plans for the complex. And when it is, that news will be announced by the Y.

But also when it came to the small park across Main Street from Tower Square. They hinted quietly that this acreage — dubbed the ‘Little Park for a Little While’ after the Steiger’s department store that sat on the site was torn down (yes, that was 24 years ago now) — will likely become the site of another “hospitality-related business,” probably a boutique hotel.

“We really can’t say anything about that at this time; that’s for … later; that will be phase two,” said Mitta, president and CEO of Mitta’s Group and a partner with Patel and also Rohit Patel and Kamlesh Patel of Maine in the Tower Square project.

As for what’s happening now, Mitta and Patel were not at all cryptic or even careful as they talked about Tower Square, the hotel, their plans for both, and their optimism when it comes to achieving progress and profitability at the office/retail complex that has certainly seen better days.

Peter Marks

Peter Marks says a long list of renovations and upgrades must be undertaken to get the Marriott flag back over the hotel, and the new ownership group is committed to making them.

“When we looked at Tower Square as a possible investment, we saw opportunity where perhaps some didn’t,” said Patel, owner of the Hampton Inn on Columbus Avenue in Springfield, a Quality Inn in Chicopee, and other hotels across the region, adding that, while there is a good deal of vacant space in the complex, especially on the retail side, there is a solid foundation on which to build, with two colleges, UMass Amherst and Cambridge College, assuming large footprints in the building.

And there are already some new building blocks in place, including White Lion Brewing, which is constructing a brewery and tasting area in the long-vacant Spaghetti Freddy’s space along Bridge Street.

As for the hotel, the press conference was called to announce that the ownership group is on schedule and on target to get the ‘Marriott’ name back on the façade. It was removed and replaced with ‘Tower Square Hotel’ in the summer of 2017 as the complex’s former owner, MassMutual, was putting the property on the market.

“When we looked at Tower Square as a possible investment, we saw opportunity where perhaps some didn’t.”

To get that brand name back, the owners must complete a comprehensive renovation and upgrade, said Peter Marks, general manager of the hotel, adding that plans have been blueprinted, considerable infrastructure work has already been completed, and the owners are committed to spending “tens of millions of dollars” to return the hotel to prominence and make it a vital cog in the ongoing resurgence in downtown Springfield.

For this issue, BusinessWest talked with Marks and members of the ownership team about Tower Square and its future (or at least the subjects they could talk about at this time) and why they believe this was a solid investment for them, and the city.

New Lease on Life

Mitta acknowledged that, to the casual observer, anyway, the glass at Tower Square probably looks more half-empty (at least) than half-full.

But the total amount of vacant space (perhaps 20% of the complex) is less than most would think, and there has been, as noted, some progress made toward bringing that number down further.

White Lion will make Tower Square its mailing — and brewing — address, he said, adding quickly that a staffing company and AT&T have come on as tenants recently.

And there is that solid foundation of education facilities on which to build, he said, adding that there are a number of different ways the space may be repurposed in the future.

This is what the new ownership group — operating under name Springfield Hospitality Group — saw when it began looking at Tower Square as a potential investment in 2018. The group paid $7 million for the 25-story office tower and attached retail space, parking garages, and the Steiger’s parcel. The hotel, a separate purchase, was acquired for $10.5 million.

“With Tower Square as a prominent landmark in the city’s downtown, we think we can bring all kinds of businesses, not just retail, to this location,” he told BusinessWest. “We think we can transform the mall into different kinds of uses.”

As an example, he said the complex could become an ‘educational hub,’ or a bigger one, given that there are already two institutions with classrooms and other facilities there.

“We’re working with two other local colleges,” he said, adding that he could not disclose their names because the talks were very preliminary. “Meanwhile, we want to bring in some basic amenities such as a nail salon or a massage parlor or banking. Overall, there are many ways we can fill the available spaces, and we have already started implementing them.”

By that, he meant the AT&T store, the new staffing agency, and the fitness center and daycare components of the YMCA’s operation, which, as noted, have not been finalized.

Overall, flexibility will be the watchword moving forward, he said, and while there are certain visions that have developed for what might the Tower Square complex might look like in a year, or five years, the shape it takes will ultimately be determined by the marketplace and the types of opportunities that present themselves.

“With Tower Square as a prominent landmark in the city’s downtown, we think we can bring all kinds of businesses, not just retail, to this location. We think we can transform the mall into different kinds of uses.”

“We didn’t have a full plan for Tower Square, because as a businessman, you have to take what is available and turn it into opportunity,” Mitta noted, adding that the business plan calls for being profitable “from day one,” and more so with each passing quarter and year.

As for the hotel, it was “unflagged” — yes, that’s the industry term — when Marriott presented a long list of needed renovations and upgrades to the previous owner, MassMutual, which decided those expenditures were not worth making.

As with Tower Square itself, the Springfield Hospitality Group saw things differently, said Patel, adding that he and his partners believe the sizable investment — whatever it will be — will ultimately translate into enough room bookings, weddings, meetings, and other events to justify the expense of getting the Marriott name back over the front desk.

Mitta agreed. He said new construction of a Marriott would require an investment of between $200,000 and $300,000 per room, based on where this building project was taking place. Between the acquisition price of the hotel and the cost of the planned renovations and upgrades, the Springfield Hospitality Group is in that ballpark and probably just below.

“And if those new construction projects are going to work, why not renovations at this prestigious landmark?” he asked, before answering that question himself, in the affirmative.

Plans call for what Marks called an ‘inside-out’ concept, where elements of the city are incorporated into the design and décor of the renovated hotel. Specific improvements call for renovations to each room and the addition of one room, a suite, bringing the total to 266, said Marks. Also, the sixth floor, familiar to most area business owners and managers because it’s home to the banquet space and conference rooms, will get a makeover that includes a new fitness center with glass walls overlooking the rooftop garden.

A new, much larger bridal suite will be added, he went on, noting that the lobby will be given a new look as well.

“There are a lot of exciting changes,” he said, adding that the hotel will become part of what’s called the ‘Reimagined Marriott World,’ a comprehensive survey of customers and potential customers to determine what they want in a hotel — and a Marriott.

“The feedback was, ‘we want more than a place to sleep,’” he told BusinessWest. “They said, ‘we want a place where we can connect, relax, entertain, and do all the things we want to do.’”

And this led to the conceptualization of what he called a ‘great room’ in the lobby.

“The entire great room is the one place to be,” he said. “There’s a bar there, you can eat anywhere in that whole great-room area, and technology will allow our staff to deliver unsurpassed hospitality in the market by going out and greeting the customer with tablet in hand and checking them in the lobby.”

Model rooms will be available for viewing this spring, he went on, adding that construction, already underway on infrastructure systems, will move to more visible areas in the coming weeks.

Staying Power

“We’re going to be the number-one, most prestigious hotel in Western Mass.,” said Mitta, adding that the planned renovations and improvements should position the hotel to fully capitalize on the momentum being seen in downtown Springfield.

He noted that the arrival of MGM Springfield, as well as the performances and events it will bring, add up to considerable opportunity for a name-brand hotel located in the heart of downtown.

“Usually, a casino like this has 1,000 rooms, and some have 1,800 or 2,000 rooms,” Mitta explained. “This one has 250 rooms. That’s not enough when you bring events like Stevie Wonder and Cher to your city. This creates opportunities. If we make this hotel business-friendly with a lot of amenities, people will stay downtown.”

That was the thinking behind this large investment, and the partners who made it are confident their investment will soon start paying real dividends.

George O’Brien can be reached at [email protected]