We’ve come a long way since the urban renewal projects necessary for rebuilding European cities after World War II and employed in American cities in an effort to eliminate blight and “modernize.” We’ve come a long way in terms of planning to avoid the loss of historic landmarks, neighborhoods, street grids, human scale and the mixture of uses that make districts interesting and viable. For better or worse, we have also lost some of the funding reservoirs that allowed for the transformative redevelopment of whole urban areas…economically important to our entire economy in new ways today…yet we can develop new and better alternatives.
Yesterday-Style Redevelopment and Its Financing
The broad topic we raise involves so many images, reference points and passions among those who might consider it that we must quickly define terms. We use “redevelopment” to mean a new way of using land which may be urban, suburban or non-urban. Urban redevelopment - using the assets of established cities - is a strong trend at present. Suburban communities are being more intensively planned to take on city qualities. Yet, we will also cite an example of mixed-use redevelopment of non-urban and largely virgin surface land over a network of played-out coal mines in an area booming as a new technology hub. In today’s mixed-use development, “the whole is more than the sum of its parts” in terms of attractiveness to today’s market and in terms of creating new economy jobs and growth. Concentrated, comprehensive funding for transformative development will accelerate it and increase its effect.
The history of what we used to call urban renewal goes back centuries and involves rulers, philanthropists and private companies. The redevelopment of Paris by Louis Napoleon and Baron Haussmann obliterated medieval charms but cleared the way for grand avenues and buildings. Thank heaven Le Corbusier did not get to implement his early modernist plans for Paris. Unfortunately, the developers of Paris Nord (the Rosslyn of Paris) did get to implement theirs. Slum renewal in Dickens’ London was funded by the government, the “private sector” and what we would call, today, NGO’s. World War II damage led to rebuilding along modernist lines across much of Europe (but in meticulously re-creating the past in several cities). Modernist urban renewal projects soon followed in the US, implemented through a succession of programs which not only funded plans, but in many cases shaped them.
The Housing Act of 1949 provided federal funding to cities to cover the cost of acquiring “slum” areas which were then given to private developers to construct new Corbusian housing. The Housing Act of 1954 added FHA-backed mortgages. In 1956 the Federal Highway Act gave federal and state governments complete control over new highways, justified on the grounds that nine out of every ten dollars spent came from the Federal Government. With the then-current goal of getting traffic into and out of the central business districts of cities (to the new suburbs) and federal planning influence over federally-funded urban renewal programs, highways were often run in straight-shot ways through urban renewal areas. Lots for large buildings unsympathetic to what remained of local architecture and scale were also established, blocking street grids, access and circulation. Some of the strongest objections to big-government funding and involvement in the planning process stemmed from this era.
In 1968 the Housing and Urban Development Act guaranteed private financing for private entrepreneurs to plan and develop new communities. In 1974 the Housing and Community Development Act established the Community Development Block Grant program, which focused on redevelopment of existing neighborhoods and properties rather than the demolition of substandard housing. These funds have proven very helpful to many cities as they stayed with the recipients and could be used over and over as they were invested and recouped.
Increasingly, states, counties and cities have provided funding for what are more popularly now called redevelopment areas. The federal government has faced and will, increasingly, have to deal with fiscal restraints. In many cases, the states and localities now face yet more – in some cases, much more – severe restraints upon their funds and credit.
Today-Style Redevelopment
Early urban renewal efforts often focused on decrepit housing. The Parisian effort focused on provisions for larger avenues and buildings. In many industrial cities, burgeoning factories, ports and transportation hubs muscled in.
Today’s planned redevelopment areas often reflect different priorities. We tend less to have factories and working ports in city centers, and transportation hubs are often buried underground or beneath air rights buildings. We tend less to clear “slum” housing wholesale, though sometimes demolish troubled public housing projects where their very form (born of early urban renewal thinking) is part of the problem. We often re-house their residents in the general area, mixed in with market rate housing sometimes so artfully that appearances do not reveal the mix.
The city lifestyle market is growing not only among “young and hip” workers deemed sweepingly to be creative and innovative, but also among those who often prove more so: older workers possessed of accumulated knowledge, creative skill and contacts (see Malcolm Gladwell’s book, Outliers). There are both workers who do not wish to venture into the suburbs and empty-nesters who return. Both shun isolation and long commutes and relish city life. Both like to interact with those of similar interests. “New economy” businesses seek to attract such workers and to congregate in zones where they can benefit from proximities to one another, availability of services commonly used, and such incentives and programs as might be established to promote their growth. Educational institutions and efficient transportation systems are part of the mix, both providing types of access. Retail and entertainment uses draw on these markets and add convenience, life and atmosphere. Areas as here described foster the growth of new technological and service industries and so represent growth in economic production rather than just consumption. They are areas in which the mix of the completed whole is more than the sum of the parts. They are areas are of special importance for the future growth of the metropolitan and, ultimately, the national economy.
Some underlying factors should be noted. First, any urban redevelopment area – and particularly an “innovation district” geared to new businesses, involves upgrading of an existing area. Start-up businesses, in particular, need an affordable cost of space and whatever help they can get in terms of contacts, advice and support. These areas are typically new rather than established real estate markets and not of the type where top rents (initially) can be charged, not where traditional financing can most easily be obtained and not where top land prices can be paid. These are areas where the fleshed-out mix of enterprises, interactions and amenities is worth more than the sum of its parts, yet where existing negative influences must removed and/or overcome by the establishment of a critical mass of infrastructure and committed projects demonstrably moving ahead according to plan.
Today’s transformative redevelopment projects involve a host of players drawing on a wide assortment of funding sources. We here very briefly cite several projects in which we have been involved to indicate the range of redevelopment types, scales, players and financing sources.
Example #1: Redevelopment of the Jersey City, NJ waterfront. Our role in Jersey City was to serve as the Economic Development Manager for the Hudson Exchange, Colgate, and Port Liberté waterfront redevelopment areas and for other redevelopment areas throughout the City. These areas included a number of the skyscrapers, the light rail system and neighborhood revitalizations shown.
As late as 1990 the Jersey City Hudson waterfront was largely comprised of former industrial sites nearly leveled to the ground. Today, entering New York Harbor, a visitor might look to either side of the Hudson and wonder which side is Manhattan. It has been the creation of a new economic engine that materially affects the entire area – and thus the kind of undertaking that was worth the pro-active involvement of the federal, state, county and city governments, a redevelopment agency and quasi-independent authorities, and many private entities to make it happen according to plan and at the pace at which it happened. Sitting back and letting things happen according to the fits and starts of the private sector alone would never have resulted in the whole package including a riverfront bulkhead and walkway, fill to raise areas under utilities and streets, a street grid where there was none, a light rail system, ferry terminals, multimodal transit hubs, and the incentive packages mounting into the hundreds of millions of dollars that lured major Wall Street firms to build front office towers as well as back offices across the river.
Jersey City is now home to firms in investments and financial services, international shipping, IT and communications technologies, media services, the arts (one of the largest concentrations of artists in the United States), a major new medical center, and many other providers of goods and services to the greater New York metropolitan area, the national market and the world. It has dramatic residential towers and hotels, a wealth of fine stores, restaurants, galleries and museums, a flourishing cultural life, excellent private and charter schools, much-improved public schools, the exhilarating Liberty State Park, a canal-laced community where once stood a defunct army base, and revitalized inner city communities. It is a place where innovators and entrepreneurs congregate and exchange ideas and services. How was this kind of redevelopment accomplished within not much more than two decades?
The power of Wall Street on the move, needing new buildings with larger trading floors, brought a lot of money to Jersey City. But they could have stayed within the boroughs or close-in suburbs of New York. Excellent cross-Hudson and local transportation, high-speed communication links and a safe, attractive environment with all the amenities quickly in place captured this growth driver and gave New York the most efficient mode of expansion as a financial capital that it could have had….precisely what it needed to keep pace with the world’s other international financial capitals. Yet, Jersey City often had to play economic development tug-of-war with the best to win key prizes.
So vast investments were made by every level of government including state bond financing, tax increment financing, strategic concentration of transportation and infrastructural investments, concentrated use of clean-up funds, use of UDAG funds, use of Community Development Block Grant funds, New Jersey Transit expansion funds, private cross-Hudson ferry operator investments, use of tax abatements, use of Urban Enterprise Zone sales tax benefits for items purchased and sold, reduced utility rates and utility infrastructure provided, Economic Development Administration loans, employee training programs, and other benefits. On top of this went the financing arranged by corporate users and developers. The incentive packages offered for the “fish that got away” (like the Commodities Exchange) and the fish caught (like the Goldman Sachs Tower) sometimes mounted into the hundreds of millions of dollars. Was it worth it? Well, when you have thousands of employees averaging large multiples of $100,000 per year, vast corporate expenditures for goods and services and eventual tax revenues on combined multi-billion dollar assessments, there are a lot of numbers to crunch. There have been controversies over unplanned extensions of tax abatements given Wall Street’s shrewdest players in the still ongoing tug of war with New York, but nobody was anybody’s fool. Jersey City reaps massive direct and spin-off rewards for its initiatives, and the over-all benefit to the economy as seen from a step back is economic activity at transformative scale.
Example #2: Redevelopment of Jamaica, Queens. We had the opportunity to work on several projects in Jamaica, beginning with bringing the New York Regional Headquarters and Laboratory of the US Food and Drug Administration to Jamaica under a GSA turnkey development and management agreement. This seminal facility was strongly sought after by several other competitor locations. It was attracted to a site provided by Jamaica’s York College, creating a symbiotic relationship which provides training to students and provides trained technicians and scientists to fill hundreds of new economy jobs. Another large federal building, the Joseph Adabbo Social Security Administration Building, provides hundreds of administrative jobs. A large New York court building adds to the critical employment mass in the downtown core. These three demonstrate government contracts and investments as early-in funding sources for redevelopment .
A long-established investment in transportation infrastructure was made to pay off in attracting these major employers, and proved worth improving. The large Jamaica Long Island Railroad transfer station was developed into a massive inter-modal transit hub connecting with subway and bus lines and the new “Air Tran” rail link which strengthened the economic tie of Jamaica as a node for service and distribution industries to nearby Kennedy Airport. Fare box revenues and non-local public investments funded this work, which brought thousands of people through the downtown core to help revitalize Jamaica’s historic business, retail and entertainment core. Upon this base of the flow of people and money, city-funded street and sidewalk upgrades were added at reasonable cost.
Renovations of historic buildings, upgrades of existing and sometimes vacant office buildings and stores, new stores and performance venues were discreet projects that could add to the base at costs manageable through conventional financing and local seed money resources of which there were many, as noted below.
Jamaica has a wildly diverse population including many creative and artistic elements. Initial low cost of space, excellent transportation and a high level of public exposure were useful assets. An inherent vibrancy some would regard as “chaos” and “over-crowding” were embraced as part of the excitement of the city, as found elsewhere in New York City in areas like Broadway and Brooklyn’s DUMBO, which have proven a happy intersections of business, entertainment, hotel, retail and surrounding residential uses. Jamaica, serving needs for creative services for one of the world’s most dynamic cities, exhibits a more flamboyant counterpart to the scene of tecchies sharing ideas over lattés so often visualized other settings. It’s New Yawk, the kind of place where the annoyance of silence would not stifle the creative juices in your office or keep you awake at night in your hotel or apartment.
A notable part of Jamaica’s redevelopment apparatus is the Greater Jamaica Development Corporation (GJDC), an NGO that fulfills many planning and economic development functions in close cooperation with and in some cases under contract with public agencies. The Borough of Queens is often involved, along with the New York Economic Development Corporation, when political support, expertise and funding are required. Components for project
finance have come from the US Economic Development Administration, the Empire State Development Corporation, the New York City Economic Development Corporation, the New York City Industrial Development Agency, the New York City Housing Development Corporation and the New York Community Trust. Senators and congressmen have played an activist role in tapping into federal projects including the designation of the York College site for the FDA facility. Locally, GJDC administers a revolving business loan fund.
GJDC receives corporate and foundation grants, government contracts and income from its project operations. The lengthy list of supporters of the GJDC and of redevelopment in Jamaica include foundations, some 20 banks and investment firms, major corporations, a university, real estate developers, professional firms and local businesses.
Example #3: Redevlopment of the USM Plant, Beverly, MA. Our role in the United Shoe Machinery (USM) Plant redevelopment (now known as the Cummings Center) was to do a feasibility study, master plan, inventory of prospective tenants, inventory of development incentives, preview of approvals and a financing plan for a vacant but soundly-built, concrete industrial complex of over two million square feet on 110 acres including a waterfront which added value but complexified the approval process. The site’s nearby commuter rail transportation, ample space for surface and garage parking, frontage on major roads able to handle the traffic and close proximity to Boston’s Route 128 “technology corridor” gave it many potentials, but there was not a market for two million square feet of any one use. Environmental clean-up costs and renovation costs loomed large, and financing was dependent on achieving a master plan based on a mixed-use transformation incorporating a tenant mix, services, amenities and facilitation of start-up tenant needs according to an aggressive schedule. Similar projects in New England had languished for years, their ultimate character and make-up unknown and ultimate prospective value never achieved, as operating losses nibbled away at funding for quality redevelopment.
Opportunities existed to connect to the near downtown core, to serve the expansion needs of a nearby medical complex and under-served medical community, and to provide for new and expanding businesses in a densely built-out area. A good housing stock already surrounded the site. Water-fronting and commercial frontage land could be spun off and revenues from interim warehouse, lightly-renovated industrial space and parking lot rentals (fleet vehicles, car dealer inventories, equipment yardage) could be tapped to neutralize operating losses and fund early project costs. A landowner joint venture arrangement with planned development components was set up, but events led to the buying out of the entire project by one deep-pockets and estimable developer for whom the project is named. The end result embodied the original project parameters and master plan.
Economic development is not all about special financing and incentives. Note must be made of what was offered the tenants. Some were established practices and businesses in healthcare, high tech and financial services. Many were start-up and/or rapidly-growing offices and labs involved in bio-tech, high tech, software development and an array of conventional services. They had the advantages of good construction with vast amounts of energy-efficient glazing and other “green” features, affordable rents, executive suites for those who needed them, a written expansion space guarantee, and a wide array of business and personal services to provide time efficiency to busy entrepreneurs. Over 500 companies are now housed at this site, many of them originally start-up’s. Some tenants have grown from the 300-400SF range to the 10,000-20,000SF range within a few years…something not often seen in grade-A multi-tenant office or R&D buildings.
Now, about the deal. After two buyout’s of the ownership entity and a grinding recession, the entire property – make that real estate, environmental liabilities and a $1.1million annual operating loss - was bought outright at $500,000. It has cost over $90 million to re-develop, absent consideration of post-purchase operations and tax considerations. Part of the deal was the State’s limitation of environmental liabilities to 50% of the clean-up cost. Tax increment Financing was used for allowable total project costs. Initial real estate taxes were abated and phased in over a period of 10 years. Real estate taxes were initially capped at $180,000 per year, with only incremental adjustments over the first 5 years and a full phase-in over 10 years. The project benefitted from Historic Tax Credits.
The Massachusetts Economic Assistance Coordinating Council designated the project the Cummings Center Economic Assistance Development Area, eligible for an array of economic development incentives and services with benefits carrying over to the tenants. Additional benefits to individual tenants were provided by the City of Beverly’s Economic Development Offices. Further advice and assistance to tenants was also provided by the North Shore Alliance for Economic Development and the North Shore Technology Council. Now fully leased, the project has been a great success.
Here are a couple of thoughts, though, to put things in perspective. At present the on-site work force at the Cummings Center is about 4,500 people…a lot, but about 500 less than when the factory was in full operation. The plant was renowned for high wages. Decades ago, machinists working on a piece rate there were averaging an unadjusted $90,000 per year. Are we doing any better at building a solid middle class today than we were then? When USM was destroyed by a questionable ant-trust action, virtually the entire shoe-making industry in the United States soon collapsed. Near these 2 million square feet in Beverly stands some 10.5 million vacant square feet in mill buildings in high-unemployment Lawrence, not to mention similar facilities in Lowell, North Andover and many other cities of the region. These mill buildings are a few decades older than the ca. 1909 USM Plant, but pre-asbestos, little contaminated by chemicals and very structurally sound. Digital Equipment Corporation, a computer giant now bought out by other firms, was headquartered in the former wool mill – a major employer - in Maynard, MA. We have evaluated similar mill building complexes which once employed thousands for business and residential purposes - see those at Manchester, CT.
The point is: We may think we are doing a good thing by redeveloping some of these facilities for today’s start-up and growing industries, but in fact we need to pick up the pace just to keep our heads above water in terms of maintaining employment for a strong middle class. We need to do what these examples show we can do, but do it faster and at a larger scale across the nation. The task is to organize to do it more effectively.
Charles Pointe, Bridgeport, WV (The first of the following two hyperlinks provides a planning overview and representative photos of projects built in Charles Pointe. The second gives more of an inside look concerning job creation, economic development benefits, roles of the landowner, user, developer and public participants, costs of the project and planned funding sources).
At first glance it may seem that Charles Pointe is “out in the boondocks” among the mountains of West Virginia. The projected employment at that rapidly-developing site, though, is greater than at the USM Plant/Cummings Center that we just described. It is included in our mix as a reminder that transformative redevelopment is not In all cases an urban thing, and opens the door to a revitalization of the West and areas of declining population in our country which we plan to take up at a future date.
The Charles Pointe project is comprised of 1,700 acres under single ownership along the I-79 high tech corridor in West Virginia. There are a number of federal installations in the area including the FBI Criminal Justice Information Services Division, NASA’s Independent Verification and Validation Facility, the US Dept. of Energy’s National Energy Technology Lab, the National Institute for Occupational Safety and Health, the Biometrics Fusion Center, and the National White Collar Crime Center. There is a concentration of institutes, colleges and universities including the Carnegie Foundation Research Institute, Fairmont State University, Salem International University, Aldus-Broaddus College and West Virginia Wesleyan College. United Hospital Center, part of the West Virginia Health System, is nearby. Local firms serving the federal government and private industry are concentrated in high tech, bio-tech, forensic sciences, bio-metrics, secure communications, data management and aerospace engineering and manufacturing (Northrop Grumman, Lockheed Martin and Bombardier Aerospace).
The Charles Point Project, now partially built out, includes office, R&D, community-serving purposes, housing, recreation and hotels. Our part of the project was the development of the Bridgeport Conference Center and hotel, pictured within the hyperlinked photos, and development of a site for a restaurant rounding out the conference-related facilities. Additional hotels have been built and a second and larger conference center is planned. In an area where little in the way of such facilities existed, these types of development have supported and built upon the economic base industries, enabling balanced growth.
A Recap, and the Central Question
In developing real estate projects and providing advisory services, we have been involved in projects transformative in one or more ways on or near the image-generating waterfronts of Norfolk, Alexandria, Baltimore, Philadelphia, Jersey City, Hoboken, Beverly and Milwaukee. In projects on other types of sites we have worked directly with colleges and universities, institutions, investment trusts, other investors and developers and a wide array of government, NGO, civic and private business organizations – a few mentioned here. In each location we have found distinct personalities and capabilities, and would not want to change that in favor of a one size fits all government program based on blitz-style renewal plans and mass disbursements of tax dollars. We can no longer afford to do things that way and we have and we have seen too many bad outcomes from such practices in other countries and our own. In some cases redevelopment activity has come full cycle, like the re-re-development of Washington, DC’s Southwest waterfront. Somehow the money is there to do things differently when we want to and conditions are ripe, without relying upon tax payers on the open prairies.
But do too many of our plans for revitalization languish on account of difficulties experienced in common in getting from point A, the concept, to point B, the redevelopment area transformed and functioning according to plan? Is there a better way for the free market to work, with a little help where and when needed through what may be several models for the use of public and private funds? Can we implement such models without an emphasis on non-sustainable public spending, but with an emphasis on raising capital and on lending and investing in ways that parallel what profit-making businesses already do? We plan to make the case in April issue that we can.
Yesterday-Style Redevelopment and Its Financing
The broad topic we raise involves so many images, reference points and passions among those who might consider it that we must quickly define terms. We use “redevelopment” to mean a new way of using land which may be urban, suburban or non-urban. Urban redevelopment - using the assets of established cities - is a strong trend at present. Suburban communities are being more intensively planned to take on city qualities. Yet, we will also cite an example of mixed-use redevelopment of non-urban and largely virgin surface land over a network of played-out coal mines in an area booming as a new technology hub. In today’s mixed-use development, “the whole is more than the sum of its parts” in terms of attractiveness to today’s market and in terms of creating new economy jobs and growth. Concentrated, comprehensive funding for transformative development will accelerate it and increase its effect.
The history of what we used to call urban renewal goes back centuries and involves rulers, philanthropists and private companies. The redevelopment of Paris by Louis Napoleon and Baron Haussmann obliterated medieval charms but cleared the way for grand avenues and buildings. Thank heaven Le Corbusier did not get to implement his early modernist plans for Paris. Unfortunately, the developers of Paris Nord (the Rosslyn of Paris) did get to implement theirs. Slum renewal in Dickens’ London was funded by the government, the “private sector” and what we would call, today, NGO’s. World War II damage led to rebuilding along modernist lines across much of Europe (but in meticulously re-creating the past in several cities). Modernist urban renewal projects soon followed in the US, implemented through a succession of programs which not only funded plans, but in many cases shaped them.
The Housing Act of 1949 provided federal funding to cities to cover the cost of acquiring “slum” areas which were then given to private developers to construct new Corbusian housing. The Housing Act of 1954 added FHA-backed mortgages. In 1956 the Federal Highway Act gave federal and state governments complete control over new highways, justified on the grounds that nine out of every ten dollars spent came from the Federal Government. With the then-current goal of getting traffic into and out of the central business districts of cities (to the new suburbs) and federal planning influence over federally-funded urban renewal programs, highways were often run in straight-shot ways through urban renewal areas. Lots for large buildings unsympathetic to what remained of local architecture and scale were also established, blocking street grids, access and circulation. Some of the strongest objections to big-government funding and involvement in the planning process stemmed from this era.
In 1968 the Housing and Urban Development Act guaranteed private financing for private entrepreneurs to plan and develop new communities. In 1974 the Housing and Community Development Act established the Community Development Block Grant program, which focused on redevelopment of existing neighborhoods and properties rather than the demolition of substandard housing. These funds have proven very helpful to many cities as they stayed with the recipients and could be used over and over as they were invested and recouped.
Increasingly, states, counties and cities have provided funding for what are more popularly now called redevelopment areas. The federal government has faced and will, increasingly, have to deal with fiscal restraints. In many cases, the states and localities now face yet more – in some cases, much more – severe restraints upon their funds and credit.
Today-Style Redevelopment
Early urban renewal efforts often focused on decrepit housing. The Parisian effort focused on provisions for larger avenues and buildings. In many industrial cities, burgeoning factories, ports and transportation hubs muscled in.
Today’s planned redevelopment areas often reflect different priorities. We tend less to have factories and working ports in city centers, and transportation hubs are often buried underground or beneath air rights buildings. We tend less to clear “slum” housing wholesale, though sometimes demolish troubled public housing projects where their very form (born of early urban renewal thinking) is part of the problem. We often re-house their residents in the general area, mixed in with market rate housing sometimes so artfully that appearances do not reveal the mix.
The city lifestyle market is growing not only among “young and hip” workers deemed sweepingly to be creative and innovative, but also among those who often prove more so: older workers possessed of accumulated knowledge, creative skill and contacts (see Malcolm Gladwell’s book, Outliers). There are both workers who do not wish to venture into the suburbs and empty-nesters who return. Both shun isolation and long commutes and relish city life. Both like to interact with those of similar interests. “New economy” businesses seek to attract such workers and to congregate in zones where they can benefit from proximities to one another, availability of services commonly used, and such incentives and programs as might be established to promote their growth. Educational institutions and efficient transportation systems are part of the mix, both providing types of access. Retail and entertainment uses draw on these markets and add convenience, life and atmosphere. Areas as here described foster the growth of new technological and service industries and so represent growth in economic production rather than just consumption. They are areas in which the mix of the completed whole is more than the sum of the parts. They are areas are of special importance for the future growth of the metropolitan and, ultimately, the national economy.
Some underlying factors should be noted. First, any urban redevelopment area – and particularly an “innovation district” geared to new businesses, involves upgrading of an existing area. Start-up businesses, in particular, need an affordable cost of space and whatever help they can get in terms of contacts, advice and support. These areas are typically new rather than established real estate markets and not of the type where top rents (initially) can be charged, not where traditional financing can most easily be obtained and not where top land prices can be paid. These are areas where the fleshed-out mix of enterprises, interactions and amenities is worth more than the sum of its parts, yet where existing negative influences must removed and/or overcome by the establishment of a critical mass of infrastructure and committed projects demonstrably moving ahead according to plan.
A Few Examples
Today’s transformative redevelopment projects involve a host of players drawing on a wide assortment of funding sources. We here very briefly cite several projects in which we have been involved to indicate the range of redevelopment types, scales, players and financing sources.
Example #1: Redevelopment of the Jersey City, NJ waterfront. Our role in Jersey City was to serve as the Economic Development Manager for the Hudson Exchange, Colgate, and Port Liberté waterfront redevelopment areas and for other redevelopment areas throughout the City. These areas included a number of the skyscrapers, the light rail system and neighborhood revitalizations shown.
As late as 1990 the Jersey City Hudson waterfront was largely comprised of former industrial sites nearly leveled to the ground. Today, entering New York Harbor, a visitor might look to either side of the Hudson and wonder which side is Manhattan. It has been the creation of a new economic engine that materially affects the entire area – and thus the kind of undertaking that was worth the pro-active involvement of the federal, state, county and city governments, a redevelopment agency and quasi-independent authorities, and many private entities to make it happen according to plan and at the pace at which it happened. Sitting back and letting things happen according to the fits and starts of the private sector alone would never have resulted in the whole package including a riverfront bulkhead and walkway, fill to raise areas under utilities and streets, a street grid where there was none, a light rail system, ferry terminals, multimodal transit hubs, and the incentive packages mounting into the hundreds of millions of dollars that lured major Wall Street firms to build front office towers as well as back offices across the river.
Jersey City is now home to firms in investments and financial services, international shipping, IT and communications technologies, media services, the arts (one of the largest concentrations of artists in the United States), a major new medical center, and many other providers of goods and services to the greater New York metropolitan area, the national market and the world. It has dramatic residential towers and hotels, a wealth of fine stores, restaurants, galleries and museums, a flourishing cultural life, excellent private and charter schools, much-improved public schools, the exhilarating Liberty State Park, a canal-laced community where once stood a defunct army base, and revitalized inner city communities. It is a place where innovators and entrepreneurs congregate and exchange ideas and services. How was this kind of redevelopment accomplished within not much more than two decades?
The power of Wall Street on the move, needing new buildings with larger trading floors, brought a lot of money to Jersey City. But they could have stayed within the boroughs or close-in suburbs of New York. Excellent cross-Hudson and local transportation, high-speed communication links and a safe, attractive environment with all the amenities quickly in place captured this growth driver and gave New York the most efficient mode of expansion as a financial capital that it could have had….precisely what it needed to keep pace with the world’s other international financial capitals. Yet, Jersey City often had to play economic development tug-of-war with the best to win key prizes.
So vast investments were made by every level of government including state bond financing, tax increment financing, strategic concentration of transportation and infrastructural investments, concentrated use of clean-up funds, use of UDAG funds, use of Community Development Block Grant funds, New Jersey Transit expansion funds, private cross-Hudson ferry operator investments, use of tax abatements, use of Urban Enterprise Zone sales tax benefits for items purchased and sold, reduced utility rates and utility infrastructure provided, Economic Development Administration loans, employee training programs, and other benefits. On top of this went the financing arranged by corporate users and developers. The incentive packages offered for the “fish that got away” (like the Commodities Exchange) and the fish caught (like the Goldman Sachs Tower) sometimes mounted into the hundreds of millions of dollars. Was it worth it? Well, when you have thousands of employees averaging large multiples of $100,000 per year, vast corporate expenditures for goods and services and eventual tax revenues on combined multi-billion dollar assessments, there are a lot of numbers to crunch. There have been controversies over unplanned extensions of tax abatements given Wall Street’s shrewdest players in the still ongoing tug of war with New York, but nobody was anybody’s fool. Jersey City reaps massive direct and spin-off rewards for its initiatives, and the over-all benefit to the economy as seen from a step back is economic activity at transformative scale.
Example #2: Redevelopment of Jamaica, Queens. We had the opportunity to work on several projects in Jamaica, beginning with bringing the New York Regional Headquarters and Laboratory of the US Food and Drug Administration to Jamaica under a GSA turnkey development and management agreement. This seminal facility was strongly sought after by several other competitor locations. It was attracted to a site provided by Jamaica’s York College, creating a symbiotic relationship which provides training to students and provides trained technicians and scientists to fill hundreds of new economy jobs. Another large federal building, the Joseph Adabbo Social Security Administration Building, provides hundreds of administrative jobs. A large New York court building adds to the critical employment mass in the downtown core. These three demonstrate government contracts and investments as early-in funding sources for redevelopment .
A long-established investment in transportation infrastructure was made to pay off in attracting these major employers, and proved worth improving. The large Jamaica Long Island Railroad transfer station was developed into a massive inter-modal transit hub connecting with subway and bus lines and the new “Air Tran” rail link which strengthened the economic tie of Jamaica as a node for service and distribution industries to nearby Kennedy Airport. Fare box revenues and non-local public investments funded this work, which brought thousands of people through the downtown core to help revitalize Jamaica’s historic business, retail and entertainment core. Upon this base of the flow of people and money, city-funded street and sidewalk upgrades were added at reasonable cost.
Renovations of historic buildings, upgrades of existing and sometimes vacant office buildings and stores, new stores and performance venues were discreet projects that could add to the base at costs manageable through conventional financing and local seed money resources of which there were many, as noted below.
Jamaica has a wildly diverse population including many creative and artistic elements. Initial low cost of space, excellent transportation and a high level of public exposure were useful assets. An inherent vibrancy some would regard as “chaos” and “over-crowding” were embraced as part of the excitement of the city, as found elsewhere in New York City in areas like Broadway and Brooklyn’s DUMBO, which have proven a happy intersections of business, entertainment, hotel, retail and surrounding residential uses. Jamaica, serving needs for creative services for one of the world’s most dynamic cities, exhibits a more flamboyant counterpart to the scene of tecchies sharing ideas over lattés so often visualized other settings. It’s New Yawk, the kind of place where the annoyance of silence would not stifle the creative juices in your office or keep you awake at night in your hotel or apartment.
A notable part of Jamaica’s redevelopment apparatus is the Greater Jamaica Development Corporation (GJDC), an NGO that fulfills many planning and economic development functions in close cooperation with and in some cases under contract with public agencies. The Borough of Queens is often involved, along with the New York Economic Development Corporation, when political support, expertise and funding are required. Components for project
finance have come from the US Economic Development Administration, the Empire State Development Corporation, the New York City Economic Development Corporation, the New York City Industrial Development Agency, the New York City Housing Development Corporation and the New York Community Trust. Senators and congressmen have played an activist role in tapping into federal projects including the designation of the York College site for the FDA facility. Locally, GJDC administers a revolving business loan fund.
GJDC receives corporate and foundation grants, government contracts and income from its project operations. The lengthy list of supporters of the GJDC and of redevelopment in Jamaica include foundations, some 20 banks and investment firms, major corporations, a university, real estate developers, professional firms and local businesses.
Example #3: Redevlopment of the USM Plant, Beverly, MA. Our role in the United Shoe Machinery (USM) Plant redevelopment (now known as the Cummings Center) was to do a feasibility study, master plan, inventory of prospective tenants, inventory of development incentives, preview of approvals and a financing plan for a vacant but soundly-built, concrete industrial complex of over two million square feet on 110 acres including a waterfront which added value but complexified the approval process. The site’s nearby commuter rail transportation, ample space for surface and garage parking, frontage on major roads able to handle the traffic and close proximity to Boston’s Route 128 “technology corridor” gave it many potentials, but there was not a market for two million square feet of any one use. Environmental clean-up costs and renovation costs loomed large, and financing was dependent on achieving a master plan based on a mixed-use transformation incorporating a tenant mix, services, amenities and facilitation of start-up tenant needs according to an aggressive schedule. Similar projects in New England had languished for years, their ultimate character and make-up unknown and ultimate prospective value never achieved, as operating losses nibbled away at funding for quality redevelopment.
Opportunities existed to connect to the near downtown core, to serve the expansion needs of a nearby medical complex and under-served medical community, and to provide for new and expanding businesses in a densely built-out area. A good housing stock already surrounded the site. Water-fronting and commercial frontage land could be spun off and revenues from interim warehouse, lightly-renovated industrial space and parking lot rentals (fleet vehicles, car dealer inventories, equipment yardage) could be tapped to neutralize operating losses and fund early project costs. A landowner joint venture arrangement with planned development components was set up, but events led to the buying out of the entire project by one deep-pockets and estimable developer for whom the project is named. The end result embodied the original project parameters and master plan.
Economic development is not all about special financing and incentives. Note must be made of what was offered the tenants. Some were established practices and businesses in healthcare, high tech and financial services. Many were start-up and/or rapidly-growing offices and labs involved in bio-tech, high tech, software development and an array of conventional services. They had the advantages of good construction with vast amounts of energy-efficient glazing and other “green” features, affordable rents, executive suites for those who needed them, a written expansion space guarantee, and a wide array of business and personal services to provide time efficiency to busy entrepreneurs. Over 500 companies are now housed at this site, many of them originally start-up’s. Some tenants have grown from the 300-400SF range to the 10,000-20,000SF range within a few years…something not often seen in grade-A multi-tenant office or R&D buildings.
Now, about the deal. After two buyout’s of the ownership entity and a grinding recession, the entire property – make that real estate, environmental liabilities and a $1.1million annual operating loss - was bought outright at $500,000. It has cost over $90 million to re-develop, absent consideration of post-purchase operations and tax considerations. Part of the deal was the State’s limitation of environmental liabilities to 50% of the clean-up cost. Tax increment Financing was used for allowable total project costs. Initial real estate taxes were abated and phased in over a period of 10 years. Real estate taxes were initially capped at $180,000 per year, with only incremental adjustments over the first 5 years and a full phase-in over 10 years. The project benefitted from Historic Tax Credits.
The Massachusetts Economic Assistance Coordinating Council designated the project the Cummings Center Economic Assistance Development Area, eligible for an array of economic development incentives and services with benefits carrying over to the tenants. Additional benefits to individual tenants were provided by the City of Beverly’s Economic Development Offices. Further advice and assistance to tenants was also provided by the North Shore Alliance for Economic Development and the North Shore Technology Council. Now fully leased, the project has been a great success.
Here are a couple of thoughts, though, to put things in perspective. At present the on-site work force at the Cummings Center is about 4,500 people…a lot, but about 500 less than when the factory was in full operation. The plant was renowned for high wages. Decades ago, machinists working on a piece rate there were averaging an unadjusted $90,000 per year. Are we doing any better at building a solid middle class today than we were then? When USM was destroyed by a questionable ant-trust action, virtually the entire shoe-making industry in the United States soon collapsed. Near these 2 million square feet in Beverly stands some 10.5 million vacant square feet in mill buildings in high-unemployment Lawrence, not to mention similar facilities in Lowell, North Andover and many other cities of the region. These mill buildings are a few decades older than the ca. 1909 USM Plant, but pre-asbestos, little contaminated by chemicals and very structurally sound. Digital Equipment Corporation, a computer giant now bought out by other firms, was headquartered in the former wool mill – a major employer - in Maynard, MA. We have evaluated similar mill building complexes which once employed thousands for business and residential purposes - see those at Manchester, CT.
The point is: We may think we are doing a good thing by redeveloping some of these facilities for today’s start-up and growing industries, but in fact we need to pick up the pace just to keep our heads above water in terms of maintaining employment for a strong middle class. We need to do what these examples show we can do, but do it faster and at a larger scale across the nation. The task is to organize to do it more effectively.
Charles Pointe, Bridgeport, WV (The first of the following two hyperlinks provides a planning overview and representative photos of projects built in Charles Pointe. The second gives more of an inside look concerning job creation, economic development benefits, roles of the landowner, user, developer and public participants, costs of the project and planned funding sources).
At first glance it may seem that Charles Pointe is “out in the boondocks” among the mountains of West Virginia. The projected employment at that rapidly-developing site, though, is greater than at the USM Plant/Cummings Center that we just described. It is included in our mix as a reminder that transformative redevelopment is not In all cases an urban thing, and opens the door to a revitalization of the West and areas of declining population in our country which we plan to take up at a future date.
The Charles Pointe project is comprised of 1,700 acres under single ownership along the I-79 high tech corridor in West Virginia. There are a number of federal installations in the area including the FBI Criminal Justice Information Services Division, NASA’s Independent Verification and Validation Facility, the US Dept. of Energy’s National Energy Technology Lab, the National Institute for Occupational Safety and Health, the Biometrics Fusion Center, and the National White Collar Crime Center. There is a concentration of institutes, colleges and universities including the Carnegie Foundation Research Institute, Fairmont State University, Salem International University, Aldus-Broaddus College and West Virginia Wesleyan College. United Hospital Center, part of the West Virginia Health System, is nearby. Local firms serving the federal government and private industry are concentrated in high tech, bio-tech, forensic sciences, bio-metrics, secure communications, data management and aerospace engineering and manufacturing (Northrop Grumman, Lockheed Martin and Bombardier Aerospace).
The Charles Point Project, now partially built out, includes office, R&D, community-serving purposes, housing, recreation and hotels. Our part of the project was the development of the Bridgeport Conference Center and hotel, pictured within the hyperlinked photos, and development of a site for a restaurant rounding out the conference-related facilities. Additional hotels have been built and a second and larger conference center is planned. In an area where little in the way of such facilities existed, these types of development have supported and built upon the economic base industries, enabling balanced growth.
A Recap, and the Central Question
In developing real estate projects and providing advisory services, we have been involved in projects transformative in one or more ways on or near the image-generating waterfronts of Norfolk, Alexandria, Baltimore, Philadelphia, Jersey City, Hoboken, Beverly and Milwaukee. In projects on other types of sites we have worked directly with colleges and universities, institutions, investment trusts, other investors and developers and a wide array of government, NGO, civic and private business organizations – a few mentioned here. In each location we have found distinct personalities and capabilities, and would not want to change that in favor of a one size fits all government program based on blitz-style renewal plans and mass disbursements of tax dollars. We can no longer afford to do things that way and we have and we have seen too many bad outcomes from such practices in other countries and our own. In some cases redevelopment activity has come full cycle, like the re-re-development of Washington, DC’s Southwest waterfront. Somehow the money is there to do things differently when we want to and conditions are ripe, without relying upon tax payers on the open prairies.
But do too many of our plans for revitalization languish on account of difficulties experienced in common in getting from point A, the concept, to point B, the redevelopment area transformed and functioning according to plan? Is there a better way for the free market to work, with a little help where and when needed through what may be several models for the use of public and private funds? Can we implement such models without an emphasis on non-sustainable public spending, but with an emphasis on raising capital and on lending and investing in ways that parallel what profit-making businesses already do? We plan to make the case in April issue that we can.
