Developers reveal financial plan for McIntyre proposal
By Jeff McMenemy
Posted Dec 17, 2018 at 11:16 PM
Updated Dec 18, 2018 at 8:35 AM
PORTSMOUTH - The city’s private development partners have proposed paying the city $100,000 a year for the ground lease to the McIntyre Federal Building property.
Steve Perdue, the vice president of Redgate, told the City Council they are seeking a 75-year term for the ground lease on the property.
He called the ground lease “the main source of income the city would receive” through the redevelopment of the McIntyre Federal Building.
Perdue added that the city would start receiving the annual ground lease payments at “stabilization,” which he defined as “95 percent occupancy” of the mixed-use development.
Redgate/Kane Co. is the city’s development partner on the planned redevelopment of the McIntyre Federal Building property.
The city has been trying for years to gain control of the federal property from the General Services Administration, which owns it. During the past year, the city has been working to acquire the property for free through the Historic Monument Program, which the National Park Service administers.
But the redevelopment has been mired in controversy, first for the size and scope of the redevelopment and then because the post office might not be able to stay at the 2.1 acre property after it is redeveloped.
Perdue shared some general information at Monday’s City Council meeting about the proposed financial deal between the city and their private development partners.
None of that information was available to the public or the City Council before Monday night’s presentation in City Hall.
Perdue shared that on the residential side, developers believe the average rent per unit that they have proposed to build will be $2,900 per month.
“That means there will be a fair number of units much lower than this, and a fair number of units higher than this amount,” Perdue said. “This is the average for the 77 units.”
Redgate/Kane initially proposed converting the federal building into office space, while building two 5½-story and two 3½-story buildings on the property.
It has since eliminated the 5½-story building off Daniel Street after receiving pushback from the National Park Service on the proposal’s scale and density.
It also dropped plans to demolish part of the one-story post office wing. Kane Company President Michael Kane said the team also reduced the other proposed 5½-story building to 4½ stories. Perdue reminded the City Council that the proposed redevelopment project will devote nearly half of the property to the public realm.
He also estimated that the city would receive about $500,000 in real estate taxes each year because of the redevelopment of the property. The developer’s total cost to redevelop the property - which is located downtown close to Portsmouth’s popular waterfront - will be “a little over $59 million,” Perdue said.
“It’s a very complex deal that has a lot of different moving parts,” he said about the partnership. The developers are scheduled to appear at Thursday’s Planning Board meeting for a “conceptual consultation,” Perdue said.
Perdue also pointed to 3,500 square feet of indoor public space, which he said is a key part of the development and will cost about $625,000 to develop. The development team, he said, is “very excited to be able to offer this space as part of the development.”
Under the provisions of the Historic Monument Program, after the developers make a “reasonable” profit, they have to give any additional money back to the city. What reasonable means will have to be negotiated between the city and its development partners.
Perdue said the developers have not yet settled on a number. Former City Councilor Bill Wagner cautioned the City Council that they had to do more work before voting on a financial deal. Because the council represents “all of our interests,” the council needs to make sure they “establish the bottom line terms necessary to support any contract,” he said during Monday’s public comment session.