FM Global makes leap of faith on old HQ rehab

NEW LIFE: A rendering of the proposed redevelopment of FM Global’s former headquarters. The Johnston building is being reconfigured to include three primary entrances. / COURTESY HOBBS BROOK MANAGEMENT
NEW LIFE: A rendering of the proposed redevelopment of FM Global’s former headquarters. The Johnston building is being reconfigured to include three primary entrances. / COURTESY HOBBS BROOK MANAGEMENT

Few investments have seemed as risky in recent years as the construction of speculative office space in Rhode Island. Since the recession, only a handful of small office projects have been completed without a tenant already lined up.
But Johnston insurance company FM Global is not afraid to test conventional wisdom.
Hobbs Brook Management LLC, FM Global’s real estate arm, began work this month on a $60 million renovation of the insurer’s former headquarters, which it hopes to turn into a modern suburban office complex capable of luring firms from across the region.
Called Northwoods, Hobbs Brook’s project instantly became the largest active construction site in the state.
When complete, Northwoods will add 338,600 square feet of new office space into a Rhode Island market that real estate observers still consider depressed.
“We are not afraid to be a contrarian,” said Donald Oldmixon, vice president of Hobbs Brook. “We think [the market] will turn eventually and want to be ahead of the curve. We want to be in a position to take advantage of it when it does.”
Built in 1973, the building at 1301 Atwood Ave. in Johnston served as FM Global’s headquarters until 2009, when the insurer moved into a new four-story, 340,000-square-foot glass and steel complex across the street.
In addition to its current headquarters, FM Global owns the old building and 100-acre lot it sits on. In 1984, the company sold the building to New York Real Estate Investment Trust called Caplease under a leaseback agreement that expired in 2009.
Caplease tried to block the construction of FM Global’s new headquarters, but when that failed the two sides came to an agreement for the insurer to buy it back.
The building has been vacant since FM Global moved out. With outdated, inefficient electrical systems and constrained floor plans, Oldmixon said Hobbs Brook had little choice but to renovate the building or tear it down. He estimates gutting the structure and then rebuilding the interior and exterior will be less expensive than tearing everything down and starting from scratch.
When completed, the building will have a cafeteria, gym, 1,300 surface parking spaces and be LEED certified to at least the silver level for energy efficiency.
“We are using the bones of the building to redo it so we maintain the structure and add new curtain walls, a new roof, new elevators, new electrical, plumbing, new bathrooms and do new site work,” Oldmixon said. “Effectively it is going to be a brand-new building.”
The building is being reconfigured for three primary entrances and the parking lots that surround the complex will be rearranged somewhat to put more spaces closer to those doors.
The existing concrete building has elements of the Brutalist architectural style and the new design intends to soften it with glass curtain walls familiar to contemporary office blocks.
The work is being executed by Dimeo Construction Company Co. of Providence.
Despite the big investment, not everyone is convinced that the project is at the forefront of a turnaround in the Rhode Island office market.
“The state might not be ready to see a flood of 300,000 square feet of office space in that location yet,” said Michael Integlia Jr., a leading developer of suburban Rhode Island office projects. “There might not be sufficient demand. “What we have seen in the last five years – with no major companies moving in from the outside – is a shuffling of tenants hunting for the best price.”
Integlia built 125 Metro Center Blvd. in Warwick, which Atrion Networking Corp. agreed to lease midway through construction, and before that two office speculative buildings on Jefferson Boulevard. Even if the market doesn’t pick up, Integlia said the new Northwoods building might do well, possibly at the expense of older Rhode Island office buildings. Landlords in downtown Providence could be particularly vulnerable, he said.
“Because of the large floorplates, it will become attractive to the large users in Providence who may move out to the suburbs,” Integlia said. “In an age of technology and the absence of large businesses like Fleet or Bank of America, the large law firms don’t need to be in Providence when they could be in a suburban campus. I think unfortunately what it might do is end up scavenging more of the tenants out of Providence and into Johnston because it’s new, attractive, exciting and less expensive.”
One reason Hobbs Brook is willing to take on a project such as Northwoods is that it doesn’t need financing. Oldmixon said Hobbs Brook is paying for the project in cash.
“The beauty of this project is that Hobbs Brook is part of FM Global,” said Peter Hayes, partner of Hayes and Sherry Commercial Brokerage in Providence, which is marketing the Northwoods. “If you were trying to get a loan for this, it would be different than having cash behind the effort as Hobbs Brook does.”
Hobbs Brook is based on Waltham, Mass., but at least right now Oldmixon said he does not see many companies moving from suburban Boston to the Providence area and anticipates that in the short term Northwoods will be attracting existing Rhode Island companies.
Hobbs Brook has not announced what kind of rent it will be asking for in Northwoods.
The building is expected to be ready for occupancy in the fall of 2014. •

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