Bayside development hits another snag
Olympia may be out of railroad land deal
By Chris Busby
After developer Ted West pulled out of a deal last fall to build a mixed-use “gateway” to Portland in Bayside, city officials struck a new agreement with three other development teams interested in building on the strip of former railroad land. Now talks with one of the three have broken down, another’s project is unfunded and in flux, and Mayor Ed Suslovic has said the city may reconsider its larger redevelopment plans for the neighborhood in light of the uncertainty surrounding this arrangement.
In March, the City Council authorized City Manager Joe Gray to begin negotiations with Waterman Development (formerly Waterman Housing), The Olympia Companies, and a joint team made up of the United Way of Greater Portland and MaineHealth, a consortium of area hospitals.
The MaineHealth/United Way team plans to build an office building and 705-space parking garage on part of the 3.3 acre strip along Somerset Street. Waterman submitted plans for a building that would include office and retail space, nearly 60 housing units and an equivalent amount of parking. Both developers’ plans are still on the table, city officials said.
The Olympia Companies planned to develop an office building for a group of non-profit organizations, with the main tenant being Community Counseling Center (CCC). But negotiations have stalled due in part to an impasse over property taxes. CCC is said to want a property tax reduction, which the city opposes.
“There didn’t seem to be any flexibility to the city’s position” opposing a property tax break, said Olympia spokesman Sasha Cook. Cook also said Olympia sought to pay less for the parcel of city-owned land it’s eyeing because the deal would not include parking rights in the area. Furthermore, Olympia is hesitant to commit to construction until it has secured a tenant for the building. “We didn’t want to be forced into building speculatively,” said Cook.
The city is counting on receiving at least $3 million from the sale of the Somerset strip to cover its obligations under a complicated deal to move its public works facilities and two privately owned scrap yards out of Bayside and onto land well off the peninsula, on Riverside Street. MaineHealth/United Way has offered close to $2 million for the Bayside parcel it hopes to develop, and Waterman reportedly offered $845,000. Without cash from Olympia, which initially offered $500,000 for a half-acre, the city will come up short when its payment for the Riverside deal is due next April.
Suslovic did not return a call seeking comment, but he recently told The Forecaster that uncertainty clouding the Bayside land sale may force the city to reconsider relocating its public works operations and instead sell the Riverside property to cover its obligations.
That prospect angers District 1 City Councilor Kevin Donoghue, whose district includes Bayside. “I’m extremely disappointed that there seems to be a low level of commitment among some officials to actually realize the Bayside Vision and housing plan,” he said, referring to the master planning document approved for the neighborhood several years ago.
“The public works land presents one of our best opportunities to realize the Bayside plan,” Donoghue said. “It’s an enormous opportunity to grow our housing stock and increase property tax [revenues]… The cost of the status quo is perpetual blight in the western part of Bayside.”
The City Council’s Community Development Committee is expected to discuss the status of negotiations with the three potential developers at its meeting on July 9. Those discussions are expected to be private. Councilor Cheryl Leeman, who chairs the three-member committee, said city officials will have to take a hard look at the Somerset strip’s development prospects — whether the three teams can commit to their projects and meet fast-approaching deadlines to begin construction in tight economic times.
Leeman said there’s been “some question” regarding developer Jay Waterman’s ability to meet deadlines set forth in the city’s request for proposals, but added, “I guess he’s moving forward.”
Waterman said he’s “hoping” his project will come to fruition, but noted several key aspects are still up in the air. Those include parking, financing, and the mix of uses in the building he plans to construct.
Waterman’s original proposal envisioned a nine-story building with office and retail space, about 60 housing units and as many parking spots. He’s now considering a seven-story building with retail on the first floor, four levels of rental units above that, and two floors of condos — “what I’m calling ‘urban flats,'” he said — on top.
There would still be about 60 units of housing, but Waterman said he’s now trying to “get creative” in his approach to providing parking for residents, retail employees and customers. He mentioned a “car share” program for residents and the possibility of working with MaineHealth to secure spaces in their garage. Other alternatives, like constructing a level of parking on the second floor of the building, “may be cost prohibitive,” he said.
A former development director for the non-profit housing developer Avesta Housing, Waterman said he’s still trying to get an investor or group of financial backers in place. The parcel he’s eyeing is currently occupied by one of two scrap yards in the area, New England Metal Recycling, which is not expected to move — assuming the relocation happens at all — until this fall. Waterman does not expect to acquire the land until next summer, months after the city’s $3 million payment is due.
Cook said Olympia is still interested in building on the Somerset strip, and sent city officials a letter several weeks ago reiterating its interest, but has not yet received a reply.
The company is in the midst of separate talks with the city to develop the Maine State Pier. That project is unrelated to the Bayside development, but there are some common factors at play, including the feasibility of financing construction before tenants are committed and the need to secure parking for the project. The terms of a preliminary deal for the pier are expected to be disclosed in the next month or so.
West went on to purchase the former Portland Public Market a few blocks away from the Somerset land for $1.9 million, the Portland Press Herald reported in May. The developer has not announced plans for the market, but industry sources expect it will be a mix of office and retail space. West also developed the AAA and Gorham Savings Bank buildings along Marginal Way, and is completing construction of an office building and parking garage at the intersection of Preble Street and Marginal Way.
The national economic downturn and credit crunch were cited as factors in West’s decision not to pursue the Somerset development [see “Big Bayside development deal scrapped,” Nov. 27, 2007].