Op-Ed: The Superman Folly

nough is Enough. This building is kryptonite!

In Rhode Island-ese, the Superman building could end up being Studio 38 on steroids. You have a company with no experience in residential or renovation work doing a project with more unknowns than knowns, with grants and loans making up over 85 percent of the current cost of the deal. While there are no “guarantees” from the city and state, taxpayers will own this mess one way or another.

It’s time for the city and state to take the Industrial National Bank building by eminent domain and create a city/state building authority to oversee the project. Otherwise, we are going to end up being the developers’ ATM when they run out of money. They can write (developer) High Rock a check for $15 million, which is more than generous, or offer them a “success percentage,” and we guarantee they’ll take the cash and we can all
move forward.

If taxpayers are going to be on the hook, we should own the building. Period. Once that is done, a realistic and feasible analysis can be developed and a path chosen. Either redevelop the building into apartments and offices, or take the approach once offered by Joe Paolino and Gilbane Construction: spend $30-40 million to knock it down and build a new building, while apologizing to all the preservationists for choosing the more fiscally responsible solution.

The third option, while not the cheapest, is arguably the best. Purchase or take the
old People’s Bank Building next door, knock it down and build a large parking garage which would add an additional financial revenue stream to the project and expand its uses, such as a hotel in part of the building, and provide proximate parking since none currently exists.

Under High Rock’s plan, taxpayers are
essentially being asked to subsidize most of the project if they end up defaulting down the road. The original developer, David Sweetser, who also had no experience with high-rise office buildings, passed away, and his attorney, Michael K. Crossen, a partner and business lawyer with Foley & Lardner LLP in Boston, is running the company in his spare time. He has never been a developer. High Rock, according to Google, is “permanently closed.” So, in essence, the company only exists on paper. And, even if they were able to miraculously put a deal together, the city and state would still be the backstop if and when the project ran into financial difficulty.

For a historical perspective, eyebrows were already raised in 2008, when Sweetser purchased the building for over $33.2 million. High Rock’s acquisition was a high-risk gamble. They were betting that Bank of America, which leased half the building, would sign a five-year extension after the current lease expired. They lost. Big time. Now they want taxpayers to subsidize their bad bet. High Rock received rent for four years, and then Bank of America moved out. They sued Bank of America for $54 million, alleging that the bank failed to uphold its repair and maintenance obligations and left behind 76 tractor-trailers full of furniture. Bank of America countered that they had spent tens of millions and their lease allowed them to leave the furniture behind.

In May of 2017, the lawsuit was settled, but the specific financial terms of the settlement were kept confidential; it was believed to be in the millions. In 2013, Buff Chase’s Cornish Associates provided a highly detailed development analysis to High Rock that set the building’s value at $15 million and pegged the renovation cost at $114.7 million for 280 apartments and 35,000 feet of retail space. The building has been a vacant eyesore for the last 13 years!

The current plan is to construct 308 apartments and about 51,000 square feet of commercial space. Sixty-one of the apartments will have some level of income and rent restriction. Today, the projected cost is over $327 million, a figure many other developers and builders consider “highly optimistic,” at best. High Rock is raising its financial commitment from $32 million to $51.6 million, or about 16.5 percent of the project. State and city officials have already pledged nearly $53 million in subsidies, tax credits, and tax breaks. The city has also agreed to a 30-year tax treaty.

The US Department of Transportation’s Build America Bureau, through its Railroad Rehabilitation and Improvement Financing (RRIF) program, has preliminarily approved a $160 million loan. At the current rate of 5.26 percent, the monthly carrying cost per unit would exceed $2,800. Even with 0 percent interest, it would still cost over $1,250 per unit per month. So much for the affordable units. The building will be ready for tenants in 2030. And, when there are cost overruns, guess who High Rock will turn to?