Worcester police chief: Past practices harmed communities of color
REMAKING WORCESTER

Developers invest hundreds of millions in the city core and beyond

Lisa Eckelbecker
lisa.eckelbecker@telegram.com

WORCESTER – The first time Michael A. Lozano heard about a possible plan to renovate the shuttered building that once housed the Worcester County Courthouse, he found the idea daunting.

He could hardly be blamed. The imposing Greek Revival structure – a historic landmark built in pieces starting in 1843 – had lain empty since court operations moved to a new building down the street in 2007. Paint peeled off the walls, and one courtroom was littered with the debris of a Bruce Willis sci-fi movie set. The state sold the bedraggled property to the city of Worcester in 2014 for $1.

But Mr. Lozano, who had previously worked with The Community Builders of Boston to redevelop a former mill building on Grand Street into apartments, said he changed his mind about the courthouse when he visited it.

“I absolutely loved it,” said Mr. Lozano, now senior project manager for Trinity Financial, a Boston development group planning a $53 million makeover aimed at turning the courtrooms, a law library and other spaces into up to 114 apartments by 2020. “Once you see it, it’s like you’ve got to figure something out.”

The project is Trinity Financial’s first in Worcester and makes it part of a flood of outside investors who are pouring more than $300 million into the city’s central core and nearby neighborhoods. It’s a surge of development remaking downtown that could position the new investors as prominent members of Worcester’s business scene.

All are risk takers. A few have experience developing properties in Worcester. All say they want to be part of the Worcester community. Some acknowledge that their money and mission could give them a voice in the city.

“I would say it’s impossible not to have a prominent role,” said Joseph E. Donovan, vice president of MG2 Group LLC of Quincy, which is spending $20 million to update its downtown apartment buildings and brand them as the Grid District. “We’ve done this all privately. We haven’t asked for any assistance. I think that warrants playing a prominent role, whether it’s communicating with other business groups, participating in the Chamber (of Commerce) efforts, participating in the discussions that occur at City Hall about the direction of the downtown area specifically.”

The second-largest city in New England, Worcester is home to about 184,000 people and situated 45 miles from Boston. That’s a distance short enough for commuting into Boston, although Boston deal-makers have not always made the reverse trek to Worcester.

The city was historically a center of manufacturing. Lawyers, bankers, retailers and other professionals worked downtown. Colleges and universities took root throughout Worcester’s neighborhoods.

But in recent decades, banks and other businesses merged, consolidated or left for newer, roomier quarters, sometimes in the suburbs. Hospitals, health insurers and educators became the dominant enterprises. Scientists creating new drugs and medical devices took up posts in Worcester, too.

The result has been a more diverse city economy, albeit one that suffers during recessions and grows slowly during expansions.

The transition was not kind to Worcester’s downtown. A late 1960s urban renewal push cleared swaths of old buildings, leaving behind a new street grid, some new office buildings and a shopping mall that went on to fail – twice.

Beginning in 1999, a few outsiders began snapping up empty or underused downtown real estate. MCPHS University of Boston, then known as the Massachusetts College of Pharmacy and Allied Health Sciences, announced plans to create a satellite campus in Worcester for its pharmacy school and other health programs, and it slowly started purchasing office buildings, vacant lots, an old hotel and condominiums.

MG2 Group, then known as the Mayo Group, spent about $22 million on downtown apartment buildings and retail space between 2004 and 2007.

Boston developer Berkeley Investments Inc. also arrived in 2004, buying the moribund mall and nearby office buildings and promising to spend about $470 million to create CitySquare, a mix of new housing, stores and offices.

That did not materialize, however, and in 2010, Berkeley sold the empty mall and nearby garages to an investment arm of Hanover Insurance Group Inc. of Worcester. Hanover tapped Legatt McCall Properties to jump-start CitySquare, and the developer soon struck deals that led to demolition of the old mall, construction of a Unum Group office building, a new St. Vincent Hospital cancer treatment center, an underground parking garage and new roads. The $70 million Unum Group building and the $23 million St. Vincent center opened in 2013.

Those transactions laid the groundwork for a number of the new investors working in Worcester today. Some acknowledge they are taking risks but also say they think the risks are worth taking.

“We’re sort of the pioneer for this luxury product,” said Ivan M. Baron, chief legal officer for Roseland Residential Trust, a subsidiary of Mack-Cali Corp. of Edison, New Jersey, which is building 145 Front at CitySquare, a 365-unit high-end apartment complex due to open in 2018. “But all indications are there’s strong demand for what we’re building,”

Who are the new investors?

• Trinity Financial. It has worked on commercial developments, high-end and public housing in Boston, Providence and New York City before coming to Worcester.

• MG2 Group. This developer seeks out overlooked urban areas such as Worcester, Lynn and East Boston.

• Roseland Residential Trust. It likes to invest in overlooked areas, such as Jersey City, New Jersey. Roseland is building 145 Front at a cost of $92 million.

• XSS Hotels of Hooksett, New Hampshire. This firm has developed hotels in Worcester, Chelsea, the Roxbury section of Boston and other communities. It’s building a $30 million, 168-room boutique AC Hotel by Marriott on Front Street that is due to open in 2018.

• Franklin Realty of Wellesley. Owner Charles F. Norton Jr., who goes by Chip, developed the Chestnut Place office buildings on Elm Street nearly 30 years ago. After Berkeley Investments sold its empty downtown mall and garages to Hanover, it also put its office buildings at 90, 100 and 120 Front St. up for sale. Mr. Norton initially passed on the properties, then reconsidered. Franklin Realty is spending $72 million to buy and renovate the properties, which have been renamed Mercantile Center.

• Clifford L. Rucker of Danvers. A serial entrepreneur who owns an equipment leasing business NFS Leasing Inc. in Beverly, Mr. Rucker is owner of the Worcester Railers, a new minor-league hockey team. He also built an ice-rink complex in the city’s Canal District, bought a historic office building at 303-311 Main St., purchased a stake in the Palladium concert hall, and is reviving an old bar at 90 Commercial St. as a hockey-themed tavern with an apartment upstairs. Mr. Rucker declined to disclose his total investment in his Worcester ventures, but public documents and previous disclosures suggest he is spending more than $21 million. He declined to speak to the Telegram & Gazette for this story.

• The Arts and Business Council of Greater Boston. The smallest investor, this nonprofit is betting on Worcester for its first real estate deal. It has spent about $1.3 million to buy a shuttered boys’ club at 2 Ionic Ave. and a nearby parking lot in hopes of creating a community arts center.

• First Bristol Corp. of Fall River. President and CEO James J. Karam spent years visiting Worcester while he served as a trustee of the University of Massachusetts system, and he came away impressed by the city’s 11 colleges and universities. First Bristol spent about $20 million to build a 118-room Homewood Suites hotel at Washington Square earlier this year.

• Vision Properties of Conshohocken, Pennsylvania. Vision builds private housing for students, and it spent about $33 million renovating the Osgood Bradley Building at 6 Grafton St., next to the rail and bus center at Union Station. The building was renamed The Edge and opened in 2016.

The new investors say they were drawn to their Worcester projects by previous experiences here, acquaintances and sometimes, pure chance.

MG2 Group didn’t decide to invest additional money in its Worcester properties until about three years ago, as nearby buildings underwent renovations and city and business officials asked the company to do more with the parts of its buildings that were shuttered.

“You could say that as a company we were here too early, be we wouldn’t have been able to assemble as much real estate as have, had we not been here early,” said Mr. Donovan.

Now MG2 Group is renovating apartments with modern finishes and appliances as units become available, aiming to attract millennials and young professionals who want to live in an urban area and are willing to pay monthly rents starting at $1,000 for a studio to $2,600 for a three-bedroom unit. Grid apartments should be fully leased by the end of October, said Steven J. Carter, director of operations for The Grid properties.

Two new restaurants developed by New England Craft Restaurant Concepts and a comedy club are planned for the lower level of 50 Franklin St., Mr. Donovan said. Nearby, MG2 Group has torn down a former adult movie house with plans to create a beer garden.

Mr. Norton of Franklin Realty had experience in Worcester, too, before taking on Mercantile Center in 2015. He owns a stake in the Worcester Business Center, a former manufacturing building on Millbrook Street, but hesitated to buy Berkeley Investments’ partially empty office properties until UMass Memorial Health Care of Worcester indicated it could move hundreds of its information technology workers to the site.

Making money on property in Worcester is difficult, Mr. Norton said, because rents are low compared to Boston. Office rents at Mercantile Center are running about $23 to $25 a square foot, he said. Top office space in Boston’s central business district averages rental rates of nearly $60 a square foot, according to Transwestern Consulting Group.

“It’s a hard matrix to follow, and you’ve got to believe that the rents and values will grow at some point in this market,” Mr. Norton said.

XSS Hotels also had business experience in Worcester. It built a 134-room Courtyard by Marriott hotel in the Gateway Park office campus, a 122-room Residence Inn off Plantation Street near the University of Massachusetts Medical School and a 100-room Hampton Inn at Gateway Park.

Building a full-service hotel downtown in a neighborhood that is not busy around the clock, however, was another matter. To overcome that, XSS is adding a large banquet facility to its hotel to attract conferences, weddings and other lucrative gatherings.

“We feel that we have an obligation to not just go in the best places, but also risky (places),” said Mark R. Stebbins, a partner in XSS with Leominster native Leo Xarras.

Among those who found their way to Worcester through acquaintances are Roseland, the apartment developer. Ivan M. Baron, chief legal officer for Roseland, said Mr. Xarras of XSS suggested Roseland consider building apartments in Worcester.

“We looked at the infrastructure and saw there was a niche for us,” Mr. Baron said. “There was a lack of new, high-end luxury apartments in that market.”

The Roseland apartments at 145 Front – two buildings are slated to open in 2018 – will rent at rates of about $1,300 to $2,200 a month. Roseland has also secured Protein House, a restaurant, and Elizabeth Grady spa and a Fidelity Bank branch for the complex.

Roseland expects its properties to be mostly rented and stable in 2019, and it holds an option on the former Notre Dame Cathedral, which could be torn down to make way for more apartments at a cost of about $25 million to $30 million.

Other developers are jumping into Worcester for the first time. Mr. Lozano of Trinity Financial said the organization had been seeking potential projects in Worcester for some time before the courthouse renovation came along.

The Arts and Business Council of Greater Boston decided to back an arts center in Worcester when it was approached by Stacy A. Lord and Laura A. Marotta, co-founders of Creative Hub Worcester. Ms. Lord, a co-founder of the popular stART on the Street art festivals, and Ms. Marotta wanted a place where artists and cultural groups could work, collaborate, perform and display for the community.

“As communities gentrify, one of the things at risk is the same community assets that were for the community,” said Jim Grace of the council. “As you get more invested in the city, programs like ours are helpful. We’re hoping to be a mission-driven project, so buildings like 2 Ionic will be there for the community forever.”

The new investors are using their own cash, taking on millions of dollars in debt, and tapping tax credits and private equity to finance the work under way in Worcester. Franklin Realty received a $20 million investment from the New England Carpenters retirement fund to help finance Mercantile Center. Fidelity Bank and Wells Fargo have provided financing, too.

MG2 Group has refinanced debt and borrowed additional funds to work on its Grid District. Trinity Financial plans to use tax credits for historic and low-income housing but could also raise money from private equity investors and conventional mortgage borrowing, according to Mr. Lozano.

At Creative Hub Worcester, Ms. Lord and Ms. Marotta are seeking grants and donations under a capital campaign.

A number said they do not plan to quickly sell their projects after completion.

“We’re not sellers. We build to own and hold,” said Mr. Baron of Roseland. “This is an urban redevelopment area, which is the core of our development (portfolio).”

All the new investors say they want to be part of the Worcester community. Some have joined or plan to join the Worcester Regional Chamber of Commerce.

They would be welcome, said Chamber President and CEO Timothy P. Murray. But, he said, “the most important thing they’re doing is creating jobs and helping expand the city’s tax base. If they’re getting involved in the community in any different ways … that’s a value added.”

The new investors do have the ear of city officials, although few seem to be making financial donations to the city’s politicians.

City Manager Edward M. Augustus Jr. said the city has been discussing the option of creating a downtown group that could contract for additional city services, such as snow removal. Mr. Augustus also said he asked MG2 Group to do more with its properties while the city improved adjacent sidewalks and street lighting.

But, he said, he hasn’t seen the new investors seeking bigger roles.

“I think they become players, but they’re maybe not part of the traditional structures or traditional organizations that we’ve seen in the past,” Mr. Augustus said.

Lawyer Michael P. Angelini of the Worcester firm Bowditch & Dewey, who has extensive contacts in Worcester’s business and government communities, was blunter.

“I think it’s a lot simpler than that,” Mr. Angelini said. “I think what people see here is opportunity for economic opportunity, not expression of power. I haven’t seen anyone throwing their weight around here.”