Tax-stabilization deals needed to make eyesores useful

COSTS LESS: Foundry Associates partner Tony Thomas says new Promenade Apartments units are about 300 square feet smaller than older ones. / COURTESY FOUNDRY ASSOCIATES
COSTS LESS: Foundry Associates partner Tony Thomas says new Promenade Apartments units are about 300 square feet smaller than older ones. / COURTESY FOUNDRY ASSOCIATES

Forty-six years is a long time to complete a real estate development. But the transformation of the former Brown and Sharpe mill complex in Providence into the mixed-use Foundry wasn’t a run-of-the-mill construction project. Antonio Guerra purchased the property in 1968, when it had become run-down, commercially obsolete and the city around it was being emptied by the suburbs. Last month, Foundry Associates marked the start of work on the final phase of the complex’s redevelopment, construction of 196 new units to be added to the Promenade Apartments, with a celebration that also remembered Guerra, who died roughly a month earlier.
Foundry Associates partner Tony Thomas looks back on the project and ahead to prospects for further development in the city.

PBN: When Antonio Guerra first purchased the Brown and Sharpe mill, was the complex being completed now exactly what he had in mind?
THOMAS: For certain. He had a vision of a large, mixed-use campus. Because of its sheer size he felt it was viable, big enough that you could have your first live-work complex in the state. And he stuck with it. He was really a pioneer and did it with very little capital. He was young and just starting his own construction company and saw this place as an opportunity.

PBN: But this was 1968. No one was doing urban mill conversions back then, were they?
THOMAS: He told me he had been to Ghirardelli Square in San Francisco and was fascinated by it. When he came back he was confident he could do the same thing here in Providence. … It took about three decades longer than he thought it was going to take. The problem was there was a disconnect between what it would cost to renovate and rents, because the buildings were dated and had environmental issues, structural issues and different maintenance. They were no longer useful for manufacturing and industrial use.

PBN: What was the turning point?
THOMAS: Without a doubt it was when we secured the R.I. Department of Environmental Management in 1994 and they moved in in 1996. With a long-term lease with the state of Rhode Island standing behind it we were able to get this building financed and then we built upon that. We did eight office buildings from 1996 until 2004, built out 600,000 square feet of office space and leased it. In 2005 we were able to take advantage of historic tax credits to build the Promenade Apartments in a building that at that point had sat vacant for over 30 years.

PBN: Are you doing anything different with the new apartments?
THOMAS: The new units are on average 300 square feet smaller than the original Promenade. We are introducing a metro unit that is around 400 square feet. Based on 10 years of experience, we decided to go with a smaller unit. When we looked at the traffic we were getting, the vast majority of people coming through the door had a price point that we weren’t always able to achieve. So we have decided to build smaller units and charge less for them than what we have at the Promenade.

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PBN: You just came through the tax-stabilization process for the new Promenade phase – what do you hope comes out of the City Council debate over tax stabilizations?
THOMAS: I have mixed emotions. If you go to a single program, it is great and transparent, but quite often one project can be quite different from another. The east side of the Sharpe Building was falling down and had environmental conditions far worse than our other buildings. The structural costs and environmental costs were well into seven figures. When you have a historic building you need to create a partnership with the city and state to make the numbers work and each building’s condition is different. So while I love the idea of transparency and cutting the politics out of the equation, people have to recognize that to get certain projects done you will have to have variances to that program. The Superman Building is a great example. Sometimes you have a building that is very important to the city, sometimes you have to change your guidelines to make it work and everyone has to make sacrifices. They’ll benefit down the road.

PBN: Is that because the demographic has changed?
THOMAS: I think what we found is in this market we were less competitive in the market for two-bedroom units. There is limited demand in the city for anything that rents for more than $3,000 per month. In fact, along the way at the Promenade, around 2007, we took 10 two-bedroom units and sliced them in half, because we had extremely high occupancy rates with our studios and one bedrooms and vacancies in our two bedrooms. The primary reason was all of those units constructed at one time as condos in downtown, the two Waterplace towers and the Westin [now the Omni]. We didn’t have competition on studios and small one-bedrooms and that is also where you get the highest per-square-foot rents. From 2005 to 2014 we think the market has changed a lot. When we started everyone wanted bigger and better and price was no object. Now we find the opposite. It is almost stylish to be small and less expensive. Now we have not had the inventory to satisfy demand. That is why we decided to do the second phase. •INTERVIEW
Tony Thomas
POSITION: Partner, Foundry Associates
BACKGROUND: The Providence native started his career in accounting, then worked in banking and for a commercial real estate brokerage before taking over management of Foundry Associates from his father-in-law.
EDUCATION: Bachelor’s in accounting, Boston College, 1976
FIRST JOB: Newspaper delivery
RESIDENCE: Lincoln
AGE: 60

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