Tangled web of interests on the eastern waterfront
Baldacci, Forsley, Liberty connections raise eyebrows
By Chris Busby
Portland officials are expressing surprise over the extent to which seemingly separate, potentially competitive development projects on the eastern waterfront are connected by common players, most notably Shipyard Brewing Company president Fred Forsley, mega-developer Michael Liberty and Bob Baldacci, brother of Governor John Baldacci. The common business ties between these individuals and their companies have caused concern among members of one major development team, and have the potential to feed recently stoked public suspicions that lucrative development deals near the Ocean Gateway cruise ship facility under construction nearby are not taking shape on a level playing field.
The city-owned Portland Ocean Terminal is one strand of this web.
Bob and Fred
On May 1, The Bollard broke news that Baldacci (an executive with Ocean Properties, one of the nation’s largest hotel management and development companies), and former Portland Mayor Peter O’Donnell (now an employee of the Maine Department of Economic and Community Development) had been meeting with individual city councilors to generate interest in a plan to build a luxury hotel at the waterfront terminal site. At the direction of City Manager Joe Gray, city planning staff and city councilors have recently begun considering a zoning change that would allow a hotel to be built in the marine industrial zone, among other previously prohibited uses. [See “Ex-mayor, Gov’s brother push waterfront hotel project.”]
Members of the Portland Planning Board have expressed alarm at what they consider the exceptionally fast pace of this re-zoning process. And waterfront business owners and other observers have questioned both the pace of the process and its fairness. For example, at the June 14 meeting of the city council’s Community Development Committee, restaurant and wharf owner Steve DiMillo pointed out that zoning governing his section of the waterfront does not allow hotels to be built there. He complained that the city was “rushing in to let a developer build a facility I can’t compete with.”
Baldacci has stressed that Ocean Properties is in an “extremely premature phase” of the hotel planning process, and that this is only one of a variety of potential development opportunities the company is eying in Portland. But though Ocean Properties’ plans for the Portland Ocean Terminal may be at a very early stage, Baldacci already has experience financing a major development on Portland’s eastern waterfront through his work with Riverwalk LLC.
Riverwalk is the partnership, which includes Forsley, that’s developing a sizeable swath of land extending from India Street across to Hancock Street and down to the water’s edge. As noted in planning documents submitted to the city, the $75 million-plus project is “one of the largest developments on the Portland peninsula in recent memory,” totaling over 530,000 square feet of office, retail, parking and high-end residential space (including waterfront condominiums and townhouses, a “health and fitness spa,” and a restaurant with seating for over 300).
Baldacci was a member of the team that put this mega-project together and beat out three other development teams that proposed projects for a city-owned waterfront parcel adjacent to the historic Turner Barker building at India and Commercial streets. The city is expected to issue a similar request for proposals to develop the city-owned Portland Ocean Terminal later this summer.
At the time, Baldacci was the managing director of the Portland law firm Piece Atwood’s consulting division, a position he left last summer to join Ocean Properties. Pierce Atwood provided “financial and communication services” to Riverwalk, according to company documents submitted to the city last year.
Baldacci is no longer actively involved with Riverwalk, said Drew Swenson, who began Riverwalk with Forsley (several other partners have since joined). But Baldacci’s association with Forsley continues through another company: Harborview Properties.
In addition to his job as Vice President for Development with New Hampshire-based Ocean Properties, Baldacci is a licensed real estate agent with Harborview (formerly Forsley Properties), the commercial and residential real estate brokerage firm Forsley owns. Though Baldacci is not listed among the sales agents on Harborview’s Web site (harborviewproperties.com), state records indicate he joined the firm in April of this year.
In a recent interview, Baldacci said he does “almost nothing” as an agent for Harborview. “I took the real estate course and needed a place to hang my license,” he said.
But Swenson points out that there are advantages Baldacci and Ocean Properties enjoy through this association with Harborview and Riverwalk. “He can bring people together of diverse interests,” Swenson noted, and has a “first opportunity to see properties going on the market.”
“Ocean Properties has been talking to us to stay in the loop [with] what’s going on in the city,” said Swenson.
Swenson also said he feels the type of luxury hotel development Ocean Properties is proposing “could be a good component” of a rebuilt Portland Ocean Terminal, along with a “very public” component on the ground floor, like a new Portland Public Market or a maritime museum.
Forsley said he and the governor’s eldest brother are close friends and have “talked a lot about” working together with Ocean Properties on real estate projects. “There’s nothing set now, but I would never say ‘no,'” to such a joint arrangement, Forsley added. “I respect [Ocean Properties founder] Tom Walsh a great deal.”
Forsley’s connection with one of the country’s largest hotel development and management companies could come in handy if he decides to build a hotel on Shipyard’s property. Though Forsley is trying to expand Shipyard’s East End brewing and bottling facility, and has asked the city for a substantial tax break to do so (a request the city council is still considering – see “Beer makes strange bedfellows,” in Briefs), he said there have been “discussions about trying to fit [a hotel] in and around our site. We’re looking at how to keep the brewery here and do that at the same time.”
If Shipyard, which developed its Newbury Street facility with help from a decade-long property tax break, is unable to get another tax break from the city, Forsley has raised the possibility the brewery may relocate off the peninsula, perhaps even out of state. A second tax break is needed to help pay off past debt associated with the brewery’s redevelopment of the once-blighted area, and to compete with beer industry giants like Anheuser-Busch in new markets, he said.
Fred and Michael
Though the national beer market is challenging, Forsley is bullish on the hotel real estate market in the eastern waterfront area – he said he believes it could support as many as 500 new rooms.
But Riverwalk, according to Swenson, nixed plans to include a “boutique hotel” as part of its waterfront development in response to the Westin hotel and condo project slated to be built just two blocks up the street, on the site of the former Jordan’s Meats plant. [That project’s future is now in some doubt; see “What’s up with the Westin?” in Gossip]
Riverwalk expects to exercise its options to buy the Breakaway Tavern’s building (left), and the Turner Barker building, both on India Street, this summer. The Breakaway will be demolished to make way for a five-story office and retail building. The Turner Barker building will be preserved and incorporated into a group of 11 townhouses.
At roughly 450,000 square feet, the Westin project would rival Riverwalk’s development in size, but the rivalry extends beyond square footage.
Riverwalk’s Longfellow Residential and Retail complex, situated on the water’s edge along an extended Commercial Street, will include 105 condominiums. The Westin project includes 95 condominiums, units that until recently were exclusively sold by Harborview Properties.
Forsley said that exclusive arrangement has expired, and the Westin’s developers – a partnership between the Procaccianti Group of Rhode Island and Michael Liberty’s locally based Liberty Group – are now selling the units “in-house,” though Harborview could still co-broker condo deals with them. The sole contact number posted on the Web site of The Residences at the Westin Old Port is the phone number of Harborview Properties’ Falmouth office.
Forsley’s role selling the as-yet-unbuilt Westin condos while developing condos nearby for Riverwalk didn’t sit well with all of his Riverwalk partners.
“There were those that felt there was a conflict and those that felt there was no conflict,” said Swenson, who includes himself in the former group. “Under the facts and circumstances, there could have been conflicts of interest.”
Given that Forsley is a founding principal of Riverwalk, his real estate firm might seem an odd choice to be granted an exclusive deal to sell the Westin condos. But Forsley has a connection with one of the Westin’s two development partners: Liberty, his partner in Munjoy South, the 140-unit, affordable housing complex located a block or so behind the Shipyard brewery.
Forsley said Munjoy South is the only project he’s currently involved in with Liberty, but it’s striking how the careers of these two men from Gray have taken similar paths.
As noted on his Web site (michaelaliberty.com), Liberty’s companies have sprawled over the past two decades to include a diverse assortment of industries, including “real estate, textiles, technology, manufacturing, movies, and entertainment.” Liberty could not be reached for comment.
Forsley has also achieved success through a diverse array of endeavors, having started businesses that “extend from recycling, health care, [and] direct response marketing, to the food and beverage industry,” according to documents Riverwalk submitted to the city. This is in addition to his real estate brokerage work and ownership of controlling interests in “numerous Portland and Maine real estate projects,” such as the Sea Dog Brewing Co. (with its own line of beers and pubs in Bangor and Topsham), a business he owns with Shipyard partner Alan Pugsley.
Forsley and Pugsley also own Federal Jack’s Restaurant and Brew Pub in Kennebunkport, and Forsley recently took over The Inn on Peaks Island, which he owns with an undisclosed number of other partners. (The Inn is owned by a Forsley LLC named Island Acquisition. Articles of organization filed with the state in 2004 declare that its managers are “not yet selected.”)
Forsley’s acquisition of the Inn – which hosted a fundraiser for Governor Baldacci’s reelection campaign earlier this year – and Harborview’s recent hiring of several real estate agents who live on Peaks have fed rumors (and, for some, concerns) that he plans to create more high-priced development there.
Just as Forsley is now doing with Riverwalk, Liberty has previously developed condominiums on Portland’s waterfront, albeit with disappointing financial results and political repercussions that still reverberate today.
As the Portland Press Herald has reported, Liberty and a partner developed the waterfront’s first luxury condo project on Chandler’s Wharf in the mid-1980s, and Liberty was also involved with a condo and office project on Long Wharf. Those investments soured when the real estate market took a downturn later that decade.
Popular opposition to condo development on Portland’s working waterfront during this period led to zoning changes that still prohibit residential projects there. The new zoning being drafted for the Portland Ocean Terminal’s end of the waterfront would allow the development of a hotel, retail shops and a restaurant, but not housing.
A scarcely visible web
Viewed as an interconnected group, the main players on Portland’s eastern waterfront – Forsley, Liberty and the Procaccianti Group (a real estate giant in its own right), Baldacci and Ocean Properties – constitute an entity of enormous potential economic (and, some might say, political) power.
City officials, even those who’ve been most involved in the eastern waterfront’s development, are largely unaware of the extent of these connections.
City Councilor Will Gorham, whose district includes this area of town, was unaware that, for example, Liberty and Forsley are partners in Munjoy South. Informed of the other connections noted above, he remarked, “You just told me stuff I didn’t know. It certainly gives pause for thought. I don’t know what to think. It’s quite a web, isn’t it?”
The city’s Department of Planning and Economic Development worked extensively with Riverwalk to craft a Tax Increment Financing (TIF) deal worth $5 million to the developers over 13 years, and most recently worked with Forsley on his request for a second TIF tax break to help pay for Shipyard’s expansion. Told of these same connections, department director Lee Urban shook his head in amazement. “I’m befuddled,” he said.
Urban said his department always wants to know if a developer seeking a tax break “has another source of funds… we want to know how active a developer is in town.”
Urban was unaware of some aspects of Forsley’s business activities, like Harborview Properties, but there’s no indication Forsley has attempted to conceal the extent of his business dealings from city officials or anyone else. The documents Riverwalk submitted to the city, for example, make ample mention of his many accomplishments. Harborview’s exclusive brokerage of the Westin condos was advertised in Portland Magazine this spring. And when asked about these connections in interviews with The Bollard, Forsley freely acknowledged them with no hint he was troubled by their disclosure.
City Councilor Jim Cloutier, an attorney with extensive real estate experience who chairs the Community Development Committee, was likewise unaware of many of the connections detailed above, but did not find them particularly unusual in the real estate business, or improper, assuming the parties involved all knew of them.
But Kevin Donoghue, a Portland transportation and planning activist recently elected to the Munjoy Hill Neighborhood Organization’s board of directors, sees a potential for problems.
“It underscores for me the need for the city to have a fair playing field for all developers and all business owners,” Donoghue said. “We can deal with that level of ownership if we have a well-regulated land market.”
Baldacci’s promotion of the Ocean Properties hotel plan, and the proposed zoning change that would make it possible, smell funny to Donoghue, a declared but as yet unofficial candidate for the city council seat representing the East End district.
He called the rezoning process “extraordinarily rushed,” and said it “has the appearance of client-ism…. It seems like we’re preparing for what may come. The city knows what’s coming.”
“Anytime you’ve got a lot of power and influence in the hands of a few people, it should be of concern for members of the community,” said MHNO president Markos Miller, who added that Forsley has been supportive of the neighborhood organization and receptive to its concerns.
A turning of the tide?
A recent legal scuffle may illustrate how one part of this loosely connected group, Riverwalk, is gaining the upper hand on the waterfront’s old guard, which has generally been more involved in industrial and marine-related work than high-end residential and retail development. (Forsley’s 1994 development of the Shipyard manufacturing site, previously the site of a run-down industrial facility, somewhat ironically helped spark the area’s current resurgence as a hot real estate market.)
Phineus Sprague Jr. and his extended family have had a major presence on the waterfront for decades. Sprague’s Portland Company marine complex is situated close to the property Riverwalk is turning into condos, townhouses and shops, but Riverwalk’s acquisition of the city-owned parcel there was jeopardized by Sprague’s claim to an old railroad easement running through it.
Sprague reportedly had the easement appraised at nearly $2 million; city officials deemed its worth to be $5,000, if anything, and threatened to take it by eminent domain if Sprague insisted otherwise.
The impasse was temporarily settled last fall, when Riverwalk dealt directly with Sprague, paying him just $100,000 for the right-of-way. But according to a lawsuit filed April 6 by Riverwalk against the Portland Company in Cumberland County Superior Court, Sprague neglected to complete some key legal parts of the deal, and attempted to impose an additional condition to the easement’s release, the suit alleges (that condition was not disclosed). When pressed to complete the deal and retract the new condition, the suit further alleges that Sprague’s company refused and “demanded payment of an additional $250,000 as a pre-condition” to the transaction’s settlement.
Court documents show that Riverwalk moved to have its suit dismissed a week after it filed it, and Forsley and Swenson both said the matter was settled in general accordance with the original $100,000 deal.
Sprague did not return a call seeking comment.