Donald Sussman’s Dumps
Rebeco meets Sangillo’s
By Chris Busby
It’s called Rebeco.
Like Tribeca, the trendy and exclusive triangular neighborhood below Canal Street in New York, Rebeco is an acronym for a section of Portland: the Rectangle Below Congress Street, a mini-neighborhood at the foot of Munjoy Hill defined by Congress, India, Middle and Franklin streets.
But nobody calls it that. Even Kevin Mattson, the real estate developer who coined Rebeco, concedes it sounds too “yuppie” for common use.
The neighborhood does have several upscale restaurants. Jordan’s Meats, the hot dog factory that dominated its southern end for decades, has been replaced by a new hotel/condo/brew pub complex. There’s a truffle shop, a designer tile store, and, according to Zagat, one of the “coolest independent coffee shops” in the country.
Other sides of this rectangle are less fashionable. The homeless shelter for alcoholics is here, and it’s not uncommon to encounter its clients slumped in doorways nearby. Congress Plaza, a featureless strip mall occupied by a chain pharmacy and a work-today-paid-today operation, is not exactly a destination to see or be seen.
The apartment houses along Hampshire Street, in the heart of this little ’hood, are even less charming. Several are vacant and have been so for years, with plywood over the windows and a padlock on the door, empty 40s on the front steps. Squatters and copper thieves have been breaking in lately. Someone spray-painted “Irish IRA” on the side of one grungy brown-shingled building, and despite its doubly irksome redundancy, the tag remained there for years until someone painted over it shortly before this story went to press.
This is why Rebeco exists. It’s not a neighborhood, it’s an LLC, a limited liability company created in 2008 to turn Hampshire Street into the kind of place people with taste and money to spend will want to live and work.
People like Mattson, who bought an apartment building on Hampshire owned by an Italian family for generations, had it gutted and converted into condos, and moved his family into the top-floor unit in 2007.
Mattson had lived in Portland for 15 years and worked in real estate for 10, but this part of town had escaped his notice. “I thought I knew just about every nook and cranny of the Hill, but I’d never been on Hampshire Street,” he said. “It’s like a hidden street, but you’re 20 steps from the Old Port …. There’s a lot of possibilities for that neighborhood. It’s a rare little gem.”
This area was once known as Little Italy, a tight-knit community of immigrants where everyone knew their neighbors and the shopkeepers spoke the mother tongue. In the 1960s, several blocks of Little Italy were demolished to make way for Franklin Arterial. The roadway severed the neighborhood’s connection to downtown and eroded its communal bond. In the years that followed, many Italian families scattered to other parts of Portland and beyond. Those that stayed grew old there and began to die off, leaving properties, like the one Mattson bought, in varying states of decay.
Mattson already owned a large low-income apartment building on Congress Street near the northern end of Hampshire. When he moved into his condo at the southern end, he got an idea: “Wouldn’t it be awesome to somehow do a street-wide historic renovation?” Some buildings along the three-block length of Hampshire were “just crap,” he said, and would have to be demolished and rebuilt, but others would need less renovation.
Mattson was in the early stages of planning this project when the money to fund it showed up. His name is S. Donald Sussman.
Sussman, the founder of a multi-billion-dollar hedge fund, was dating former state senator Chellie Pingree, though their relationship was not considered public knowledge at the time. (The Bollard broke news of the relationship in a July 2008 article, “Chasing Chellie.” The couple married last summer.) Sussman had a vacation home on Deer Isle, but otherwise split his time between an estate in Greenwich, Conn., and the tax-friendly Virgin Islands, where his hedge fund is headquartered. Now he was looking for a crash pad in Portland.
Mattson, a former director of the Maine Democratic Party, had previously worked for Sussman on political and environmental issues. Sussman has been a major source of funding for progressive causes and candidates (including, of course, Pingree). Mattson introduced his wealthy friend to the neighborhood said and Sussman “absolutely loved it.”
By the summer of 2008, Mattson and Sussman were neighbors and business partners. Sussman purchased a residence in the area and accepted Mattson’s pitch to form Rebeco.
The pair didn’t have a firm plan for the project or, as it turned out, a shared vision for the neighborhood. Their divergent ideas eventually led to Mattson’s departure from Rebeco in March 2010, a split Mattson describes as amicable. The LLC is now solely owned by Sussman and managed by his attorney, Tom Federle.
Rebeco’s approach was to buy first and plan later. Much later. Meanwhile, numerous apartments they owned remained vacant. Neighborhood activists got worried, and then they got organized. Their inquiries seem to have prompted Sussman to put the project on a faster track.
Later this month, nearly three and a half years after its inception, Rebeco is expected to announce a development partner for its Hampshire Street project. It’s not entirely clear what the new development will look like, but one thing is certain: the neighborhood will never be the same.
Buying a neighborhood
Rebeco has acquired seven properties along Hampshire Street and the amputated dead-ends where Newbury and Federal meet Franklin. City tax records indicate that Sussman’s company has spent over $3.3 million to purchase those buildings.
The Congress Street apartment building Mattson previously owned is now owned by an LLC with the same Commercial Street mailing address used by Sussman and Rebeco. Together with the properties Sussman bought in the neighborhood for his personal use, his total investment amounts to over $6.5 million, not including money subsequently spent on the properties’ maintenance and improvement.
(In the wake of the assassination attempt on Congresswoman Gabrielle Giffords last January, many members of Congress have taken extra steps to ensure their safety. The Bollard has agreed to a request made by Sussman not to identify the specific residential property he lives in with Pingree.)
One of the first properties Rebeco picked up was a former tobacco warehouse, at 56 Hampshire St., now occupied by the Portland Food Co-op. Sussman gave the non-profit co-op a five-year, rent-free lease, plus additional funds for renovation.
Tax records indicate the warehouse was purchased in early 2008 for $600,000, nearly twice its assessed value. Records show that Rebeco also paid top-of-the-market prices for other properties. A two-family house at 167 Newbury, assessed for tax purposes at just under $195,000, was bought for $525,000. The three-family house next door, valued at $277,800, was also bought for $525,000.
Mattson said Rebeco did not overpay for the buildings and had each independently appraised prior to purchase. The tax-assessed values “did not reflect reality,” he said, because most of the properties had not changed hands in decades, and revaluations are typically triggered when a property is sold.
Viewed on the tax map, Rebeco’s holdings along Hampshire Street resemble a series of Monopoly properties, but there are some holes in the company’s holdings. For example, the block defined by Hampshire, Newbury, Federal and Franklin streets is almost entirely under Rebeco’s control. The exception is the three-family house at 36 Hampshire St., which tax records indicate is owned by a Massachusetts man who bought it over 10 years ago.
Mattson said Rebeco attempted to buy additional properties in the neighborhood, but their owners either refused to sell or were asking too much. “A couple of people were just like, ‘no,’” Mattson recalled. “‘I’m 92,’” one woman told him. “‘I’ve been here since I was born and I’m gonna die here.’”
Mattson later said he believes the woman decided to sell after all.
Some of the units in the apartment buildings Rebeco bought were already vacant. In other cases, renters moved out soon after Rebeco purchased the building. Some apartments have remained occupied or are currently for lease.
According to Daniel Bell of Sullivan Management, the company Rebeco hired to maintain its properties, tenants left for a variety of reasons. In one case, the people living in a Newbury Street apartment Rebeco bought were not paying rent and were “bringing drugs onto the property,” he said. They were evicted, but, “we didn’t go after them for past-due rent,” said Bell. “We wanted an amicable parting.”
The tenants of a building on Hampshire Street had to be “transitioned out,” said Bell, because the structure was deemed unsafe.
“People have a right to live in a unit that’s affordable,” said Mattson. “But cheap housing is not affordable housing.” Some of the units Rebeco picked up lacked proper fire-escape routes and had lead paint and other hazards, said Mattson, whose own property had asbestos that needed to be removed.
“We were moving forward with the redevelopment project, so it made sense to move people out,” he said. Shortly before his formal split from Rebeco, Mattson himself left the neighborhood. He said his family had grown too large for the condo.
The India Street Neighborhood Association formed last year partly in response to Rebeco’s activities in the area.
“I started out very skeptical of those guys just buying properties and emptying them without a clear plan,” said Joe Malone, a commercial real estate broker who leases space in the area and helped form the association. “That was disturbing to me.”
Hugh Nazor, an officer of the organization, said Rebeco’s vacant apartments have been “a considerable concern … It decreases the number of feet on the street, which is our biggest concern here.”
Malone and Nazor said Sussman and his attorney, Federle, were responsive to the neighborhood group’s concerns once the issues were brought to their attention. Beginning last summer, members of the group were invited to attend informal planning workshops and encouraged to share their ideas for the Rebeco project. Participants have discussed the benefits of a mixed-use development with retail space on the first floor and residential units above.
Rebeco has also reached out to the arts community both here and nationally. Last fall, it hosted a visit by representatives of ArtSpace, a non-profit based in Minneapolis that develops affordable live/work space for artists.
Artspace is preparing a report on the feasibility of such a development in the neighborhood, but Rebeco has also solicited proposals from a handful of local development firms.
Kevin Bunker of Developers Collaborative was among the locals approached by Rebeco for this project. He said Federle provided some broad concepts to incorporate, including arts-related uses and ecologically sustainable design, but otherwise set few restrictions.
Malone said the plans he’s seen involve multiple buildings with green space between them, retail use on the ground floor and residences above. “I think they’re 99 percent sure what they’re going to do,” Malone said. “The question is, do they do it as condos or luxury rentals?”
Malone said he’s relieved that the plans he’s seen reflect the scale of the neighborhood as it exists now. Several large-scale projects proposed for the India Street neighborhood in recent years have failed to materialize, leaving empty, fenced-in lots that blight the area. Given the scale of Rebeco’s project and Sussman’s ability to self-finance it, Malone thinks this plan is the most likely to be built, though it’ll almost certainly be 2013 before the first shovel hits dirt.
Sussman agreed to answer questions for this article submitted by e-mail. Asked to describe his vision for the project, he wrote, “rather than project my vision, I have been gauging the vision of the neighborhood association and the community in an effort to arrive at a sensible redevelopment that has a positive impact for the neighborhood and the city.”
Mattson said he had envisioned a straightforward “commercial redevelopment housing project,” but Sussman’s approach was more “philanthropic,” as evidenced by his decision to buy a building for the food co-op and let them use it rent-free. The opinions of observers are divided as to whether Sussman wants the project to make money (or at least cover his investment) or not, though no one thinks he needs it to.
Asked why it’s taken so long to get the project started, Sussman cited the fact that the tobacco warehouse had been vacant for many years before the food co-op moved in. “Good results often take real planning and real planning often takes time,” he wrote.
Is he concerned that Rebeco’s vacant properties are having a negative effect on the neighborhood? Sussman answered by changing the subject. “On the contrary,” he responded, “I believe that the community discussions that we are having about the neighborhood and how best to revitalize it are a positive, not a negative, for the neighborhood.”
Lastly, we asked Sussman about Sangillo’s Tavern, a neighborhood dive bar that’s been around for over 45 years, first on India Street and then, since 1996, on Hampshire.
Like all good neighborhood bars, its clientele reflects the place it serves — a community where, as Malone noted, “you have welfare Section 8 [recipients] next to billionaires.” These days, skinny black rappers rub shoulders there — literally; the place is small — with burly white workmen while old-school, elderly Hill people sit at the bar nursing cocktails.
The neighborhood’s wealthy newcomers have been discovering Sangillo’s and finding themselves welcome. One regular said he was taken aback recently to see Sussman and Pingree drinking there with former Maine Senator and Secretary of Defense Bill Cohen.
Rebeco doesn’t own Sangillo’s. Five years ago, when interest in the neighborhood’s real estate was heating up, developers were showing up and inquiring about buying the place. It’s still not for sale, and Sussman is apparently uninterested in acquiring the property (he wrote that he will not have to purchase any additional buildings to complete the current development plan).
How would Sangillo’s fit into that plan?
“The most vibrant urban neighborhoods typically include a mix of uses,” Sussman wrote. “Restaurants and taverns are a natural part of this. Sangillos [sic] is a neighborhood bar that certainly could fit in with redevelopment on Hampshire Street.”
Perhaps all will not be lost after all.