Worcester Business Journal
During this inaugural episode of The Weekly Business Report, Jim Umphrey from Kelleher & Sadowsky sits down with Worcester Business Journal editor Brad Kane and talk show host Hank Stolz to discuss new institutional investment coming into Worcester.
14:03: Hank Stolz: The weekly Business Report presented by the Worcester Business Journal and Radio Worcester continues and we are very pleased to welcome Jim Umphrey, a principal of the commercial real estate firm, Kelleher and Sadowsky, and Brad (Kane) you’ve invited him to come on the show going to be talking about commercial real estate here in the city of Worcester.
14:18: Brad Kane: There’s a saying my old editor used to say about business journals in general is that if you know commercial real estate you know the whole areas economy because not only do you know property values and sales and everything else, but know who’s coming and who’s going who’s expanding. So to that end Jim Umphrey might be the most informed business person in all of Greater Worcester. So I think he’s great to be the first guest of our new podcast series. Jim, I’ve really set you up here. Now you really have got to give us all the insight you have about Worcester commercial real estate in Worcester!
14:45: Jim Umphrey: I’ll take the false compliment. But thank you for having me. Glad to be here.
14:55: Hank Stolz: I’ll follow up on what Brad just said. So I mean maybe a little bit of an overview then. Where are we (as a city in terms of economic development)? Certainly have a rosy picture being painted of what’s happening. The word renaissance is used quite a bit from your vantage point. Do we have new entrepreneurs….new investors coming in and buying up properties?
15:17: Jim Umphrey: There’s a lot of very positive momentum for Worcester now. And I think it’s driven by several different things. I think that Worcester on a more global basis has made a great transition from kind of the older economy that was what Worcester traditionally did which was manufacturing anything from grinding wheels to airplane parts to taper pins…….. to an economy that’s really based much more on healthcare, education, and science. That’s really brought Worcester into a place where we’re able to attract solid intellectual capital into the community and businesses have really followed suit.
Our economy is very diverse and very strong. From a real estate perspective that’s really driven the market and has contributed greatly toward building the success and momentum that we are enjoying today in Worcester. For example, the residences at 145 Front Street were developed by Rosalind Real Estate Investment Trust. They built 370 apartments on speculation and were able to lease nearly 100% of the units at market rate in 15 months. That particular development really was the proving ground to other developers that Worcester has clearly got demand for this type of product….and that rents pricing-wise exceeded expectations on their pro forma. So to outside developers, it shows that the market has got some strength to it and the velocity under which they rented that many units would compete favorably with the lease-up of a building in Boston.
Additionally, what’s also very appealing to these outside investors from places like Boston is that the initial acquisitions costs of land and/or buildings is significantly more affordable. The basis on these properties is much less than what they’re bidding on in Boston.
So in general I would say that cities like Worcester, you know, they work off of the momentum gained from projects like 145 Front Street and others. And there’s a lot of positive momentum in Worcester at this time.
18:08: Brad Kane: So Jim, I know you’ve been in commercial real estate in Worcester for a number of years now. At Worcester Business Journal, we’re starting to see outside investors putting money into Worcester at places such as Greendale Mall which was recently bought by a Boston area developer (Finard Properties LLC) for $7.125 million…..and the old Worcester courthouse project to Trinity Investments of Boston. Compared to previous years, are we at the highest level of economic activity in Worcester that we’ve ever been at? Are we getting to a new level?
18:38: Jim Umphrey: We are definitely getting to a new level. Previously, we have had developers from outside the area invest such as New England Development who came in and initially built the Greendale Mall. They also renovated the old Worcester Center into what became the Worcester Common Fashion Outlets years ago. They’re a big regional retail developer. Aside from groups like that, most of the developers were more boutique-type developers who invested in Worcester because they didn’t have to compete with institutional money (like in bigger cities such as Boston). These investors could buy product here in Worcester relatively inexpensively and do value-added-type developments.
Today, in terms of interest in and actually purchasing commercial real estate properties in Worcester, we are seeing much bigger regional developers considering Worcester in a very different way. They’re not looking at Worcester as just a cheaper alternative to Boston. They are looking at Worcester as having huge amount of opportunity in front of it.
19:45: Hank Stolz: In regards to that part about having this huge opportunity in front of it… how much of the interest in Worcester amongst these bigger regional investors is driven by the excitement of the new ballpark, Polar Park stadium?
20:10: Jim Umphrey: Again, I hate to use the same words, but the interest in Worcester by these developers is cumulative based on a number of factors (of which the ballpark is one of them. The addition of Polar Park is important because it provides more of an “18-hour” type of experience for the downtown. It shows vitality. If you consider Boston or New York or any other major U.S. city, their downtown areas have a significant amount of high-end residential population, and there’s also lots of things to do…..things that bring people downtown. Boston has the Garden, Fenway Park, and other destinations. In Worcester, with events at DCU Center, shows at The Hanover Theatre… acts at the comedy club and concerts at the Palladium and Mechanics Hall… and new restaurants opening seemingly every month… we’ve got the ingredients here in Downtown Worcester for success.
That’s important to outside investors and to companies considering relocating to Worcester. It’s important to them what employees might think about working and living in Worcester. In this context, Polar Park Stadium is clearly an important amenity… and helpful to their employee recruitment efforts.
21:50: Brad Kane: Jim, I know you are you and your firm Kelleher & Sadowsky are working with a lot of the developers, including Denis Doddle (Madison Downtown Holdings), who is doing the mixed-use portion of the WooSox project, and David Greaney (Synergy Investments) who just bought the Worcester Plaza Glass Tower at 446 Main Street. Understandably, there’s a lot of excitement involved with this important projects Are there other projects out there? Is there another project that you’re really excited about or you think can really make a difference?
20:10: Jim Umphrey: Mercantile Center was the big project that got the ball rolling. Mercantile was developed by Chip Norton (Franklin Realty Advisors, Newton, MA) who purchased the properties in 2015 and then redeveloped and repositioned it in the market. Today, it is virtually full from an office space perspective Additionally Franklin Realty has signed multiple name-brand leases with restaurants, including Fuel America which is similar to a Starbucks; Ruth’s Chris Steakhouse, the first national high-end chain to come downtown since Legal Seafood left 20 years ago; and most recently, Broadway Hospitality, a restaurant group best know in this area by its operation Tavern in the Square. They’ve joined other great restaurants like 110 Grill and others and the foodie-favorite, Deadhorse Hill. As a result, we’re approaching an important critical mass of venues that nighttime experience.
The Glass Tower at 446 Main Street is going to be a very exciting development project. Synergy Investment plans to invest significant money into the property. Their objective is to add a restaurant on the first floor as well as a fitness center that will be open to public membership. Currently, downtown Worcester does not have a fitness center such as they are proposing. Synergy plans to redevelop and reposition the building into on the City’s premier Class A buildings.
As a result of the investments by these developers (Norton, Dowdle, and Greaney) and others, we expect additional interest in downtown Worcester… be it in residences, offices, restaurants, entertainment or retail space.
Lastly, a mile from downtown Worcester, there’s a very exciting project that the WBDC (Worcester Business Development Corporation) is in the in the midst of doing called The Reactory. It’s a different segment of the economy that we’ve been discussing but it’s vital to the region; biomanufacturing. The Reactory is the first project of the Commonwealth of Massachusetts’ Open for Business strategic initiative designed to create economic opportunity from under-utilized state properties We’ve got our first site under agreement to a Chinese pharmaceutical company called WuXi. We hasn’t closed yet… but have our fingers crossed (Laughing). Hey, that’s real estate! Like the other projects mentioned previously on the show, The Reactory is one of the cumulative ingredient that give us hope… that show momentum for our community. Especially, from an industrial point of view, The Reactory is about cutting edge type industrial development. Smart manufacturing that will provide more than 150 jobs. Joining The Reactory, I think you’ll start to see how cutting-edge projects like The Reactory will kick-start some older industrial properties to become redeveloped and land sites built into new ground-up developments. Again, it’s all about momentum. One successful endeavor building off of another. A chain reaction.
26:00: Hank Stolz: I think that’s where we need to leave this segment of the WBJ Weekly Business Report.
26:07: Brad Kane: We could probably pick Jim’s brain for two years! Thank you very much for your time and insight, Jim Umphrey, a principal at the Worcester commercial real estate firm, Kelleher and Sadowsky.
Listen to the entire podcast here.