During every special permit process in Newton (and other municipalities) comes a time when the project’s developer seeks to hammer out an agreement with (in our case) the city council that will earn them the needed 2/3rd votes to move forward.
Typically, this includes negotiating various community gives backs or and project alterations.
Giveback requests might include mitigation funds for road, sidewalks or traffic mitigation; community space; or other infrastructure enhancements.
Alterations might include the project’s size, layout, design or mix of uses.
And the requests for changes or community givebacks come from all directions:
- Neighborhood opponents — who worry that a project will overwhelm their neighborhood — will call to make a project smaller, less tall, or with a different mix of commercial vs. residential makeup, etc.
- Others — including housing advocates and environmentalists — may ask for the opposite, seeking more affordable units, or a or a greater commitment to sustainability, and so on.
- Still others might hope to eek out funds or a place for various special interests: an artist space, dog park, bike paths, walking trails, public art, subsidized retail, etc.
Nearly every one of these changes – from shrinking a project to increasing affordability — impacts the developer’s bottom line and whether or not lenders will agree to finance it.
But generally, we the public have no idea what that bottom line is.
Which is what makes an overlooked aspect of the recent Riverside visioning project so interesting.
As part of the Riverside process, Civic Moxie, the consulting firm hired by the city, brought in independent experts to run ten scenarios for developing the site (as well as Normandy’s never built project for the site from 2013) evaluating the expected land costs, hard costs and potential revenue for each project.
Then separately, developer Robert Korf of Mark Development (whose special permit application for Riverside Station will be heard for the first time at a joint Land Use/Zoning and Planning Committee meeting on June 4) opened his books to Civic Moxie and the firm conducted an independent evaluation of his proposed project.
You find a summary of the findings in the Riverside Vision Plan final report, starting on page 78 and especially the graphs on pages 81-84.
Or if you have ten minutes, you can watch it all explained quite clearly in this video:
I really hope you’ll watch the video because it does a better job explaining this than I can. But basically, here’s what we now know:
After factoring in overall construction/land costs and returns at 10 different levels of density, Civic Moxie concluded that revenue for the 2013 never-built Normandy project would fall far short of the industry standard of 7-9 percent return on costs.
Civic Moxie then went on to conclude that in order to crack the minimal industry standard of seven percent, a project in today’s market would need 1.6 million square feet of development with many more residential units and square feet of office space than what Mark Development is proposing.
So how rich would Robert Korf get from Riverside Station?
The answer is, as proposed, this project appears to be on the low end of where most developers and lenders would be willing to invest (remember the project includes building a direct exit off off Recreation Road/I-95 onto the site, a lease with the MBTA and building parking for T riders).
Any downward economic trend could lessen the value as would making the kinds of concessions that stakeholders on all sides might hope for.
So now we know.