Prompted by a 2004 consolidation inquiry, Stop n’ Shop--headquartered in Quincy, MA--called on a longtime relationship with StreetWorks to evaluate the situation. StreetWorks saw an opportunity to do a full redevelopment of Quincy’s entire Downtown and devised an innovative public-private partnership with the city of Quincy to create a 50-acre, $1.6-billion Quincy Center Project. After culling together 30 pieces of land from 30 separate owners, the gears are in motion to break ground as soon as possible. StreetWorks’ Richard Heapes sat down with GlobeSt.com to answer six questions on the project and why their PPP may be a new model for future infrastructure and development plans.
GlobeSt.com: How is your deal with the city of Quincy different than other PPPs?
Richard Heapes: It’s really an LDA, land disposition agreement. It should be referred to as a master agreement. It’s more than the city disposing their land to development. It takes a PPP and flips them upside down. In the old way, the city or the public would buy or own the property. They would tear everything down, they would float a bond for parking or for new roads or new infrastructure and then set up and RFP and say to developers, “Okay, we did all our stuff, now you came and give us a proposal to develop the parcel.” Developers would compete to do that. And at over time, because the city had no connection with the market, that hole would sit there for years or as a blank site, while the city floated a bond and the city was on the hook for bond payments, even though nothing was happening.
What we do that is unusual is we will develop the plan. We will spend the money to get them approved at different state levels, put the infrastructure in. We will put the parking in, but everything the city needs to develop its downtown with the following arrangement. And the city council will vote that if we do that and if we do our development and the tenants are actually in the buildings, paying new taxes, the city will buy those properties back from us.
So what we’re looking at is millions of dollars of streets, sewers, roads, trees, parks and parking, that we will pay for and the buildings go up and tenants are paying taxes and only then will the city buy those back and they become public again. It’s kind of upside down.
GlobeSt.com: So, you put in the development costs up front?
Heapes: Of the public infrastructure. Of the things that the public normally does, which they will then own. The reason that works for us is we get to build it all at once, more efficiently we believe, than the public can. Quincy is a tenant-worthy city, you can’t do this everywhere. That’s some 30% of a real estate project that, we already know that’s paid for if we perform, which we have under our control.
Globest.com: But there’s never a point where Quincy starts kicking money into the project?
Heapes: No, never. If the tenants are there, the tenants have been paying taxes for two quarters. Quincy gets paid ahead of us. There is some initial infrastructure, three pieces, that they need to do to develop the town. Town Brook, a little piece of transportation and a relocation of Town Brook, which Quincy needs to take care of before we can start this program. And for that, we are collectively looking for state and federal money.
GlobeSt.com: What kind of federal money?
Heapes: At the state level, really transportation and infrastructure from the federal level. These things don’t actually work with our model, because until they’re done, the private development can’t start. There’s no way for us to get at those first. They kind of set the table.
But, the city can go to the state and say, “we have a $1.6-billion redevelopment that can happen, but oh by the way, as a city we’ve already got a developer and they’re kicking in $300 million. We need $50 million from state and federal, which will yield $1.6 billion in new jobs and everything else.” It’s pretty rare that the federal government is the latest investor after a lot of other people have put money in. Usually it’s the other way around. The federal government is looking at this as a quite a model because private sector and local takes the first step.
GlobeSt.com: If you have the money.
Heapes: Well, we have the spending money. We’ve already spend $20 million. And by the time it’s set to go we’ve spent about $50 million from the planning and everything. It’s all private investment money.
GlobeSt.com: How long will it take, start to finish?
Heapes: We’re looking to see improvements to Town Brook start in 2012. We will start the private development in 2013. Open step 1 in 2015 and then to complete the whole thing, seven or eight years. So, from right now, it’s about a 10-year build out. And if we open in 2015 with the first phase, usually it takes two to three years for a project to stabilize, and we see returns.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
