Decision made on 40-year tax exemption for medical building in Quincy

QUINCY − The planning board has approved a 40-year tax exemption for a new medical office building proposed by FoxRock Properties at the site of the former Ross Garage downtown.

The approval would extend a 15-year tax exemption allowed under state law for urban renewal projects, relieving the developer from property tax payments until the end of 2064, pending final approval by Mayor Thomas Koch.

It was announced in October that Beth Israel Deaconess Medical Center signed a lease with FoxRock to manage an ambulatory care center that would provide a range of medical services, including urgent care, primary care, radiology, cardiology, OB-GYN, oncology, orthopedics, a pharmacy and a lab.

The facility would not provide emergency care or operate 24 hours a day, a FoxRock representative said.

The planning board also approved a change to previously submitted plans that would reduce the amount of space devoted to medical uses from 115,000 to 100,000 square feet. That modification needs city council approval.

Koch says tax deal is a good investment

Koch told The Patriot Ledger that it wouldn't be possible to bring important medical services back to Quincy without the tax incentive.

"It all comes down to the dollars," he said. "FoxRock isn't making a profit on this. It's a commitment Rob Hale made to me in exchange for the land up at the hospital," a reference to the former Quincy Medical Center on Whitwell Street, which FoxRock acquired in 2016 and converted into the 465-unit residential complex known as Ashlar Park.

As a part of that deal, Quincy named FoxRock as the designated developer for the Ross Lot with the expectation that the firm would try to build commercial space for medical uses.

"FoxRock is paying serious new taxes on Whitwell and on new projects over here," Koch said, referring to the Center and Stone buildings on Hancock Street. "Hospitals don't pay taxes. Their margins are so slim on the revenue side."

FoxRock says tax deal is for Beth Israel Deaconess

FoxRock Managing Director Mark Carroll said the company agreed to a "triple net" lease with Beth Israel Deaconess, in which the tenant pays a base rent to the owner and pays all building-related expenses, including property taxes, insurance and maintenance.

Given the terms of the lease agreement, Carroll said FoxRock could not attract Beth Israel Deaconess without the 40-year tax exemption.

"It's not a benefit for us," he said.

Asked if Beth Israel Deaconess would still require tax relief after the 40-year exemption expires, Carroll said future arrangements would have to be negotiated by the owner, the city and the tenant.

As a 501(c)(3) nonprofit, Beth Israel would be exempt from property taxes if it owned the building outright.

FoxRock would pay taxes on retail space included in the project. What about the 515-space garage?

At Wednesday's planning board meeting, FoxRock Director of Design and Construction Josh Kleinman said only the 100,000-square-foot medical office building would enjoy tax-exempt status. The rest of the project, known as Switchpoint Quincy, includes a six-tier, 515-space parking garage; a two-story restaurant; a two-story retail building; and a small park at the property's northern tip.

It is uncertain if the parking garage would produce tax revenues for the city. Deputy Planning Director Rob Stevens said public ownership of the garage is under consideration.

The city has invested about $25 million of public money in preparing the site for the medical building, according to city records.

Of that $25 million, $4 million was spent for soil remediation. The former parking garage was heavily contaminated with lead paint and oil, Municipal Finance Director Eric Mason said.

About $4.12 million was spent on telecommunications infrastructure and $3.4 million on subsurface improvements, including water, electricity and sewers. The remainder of the $25 million went toward preparing the lot for construction, which included ground leveling, drainage and engineering and design costs, Mason said.

The city council approved money for these improvements in 2019 as part of the third of four District Improvement Financing bond authorizations. Known as DIF, the program allows cities to finance public projects for a designated district through projected growth stimulated by improved infrastructure.

State law allows tax exemptions

Under Chapter 121A of state law, developers in urban renewal areas, such as downtown Quincy, receive 15-year exemptions from real estate and personal property taxes when they build public amenities on properties considered to be blighted.

To be eligible for the maximum 40-year tax exemption, developers must show that their project provides certain amenities. In its application, FoxRock listed medical services, high-paying jobs and economic stimulus as amenities warranting the exemption.

In an application filed with the planning board, FoxRock also said that without the long-term exemption, the project would not be financially viable because of “construction costs, suburban office rents and the high interest rate environment."

Stevens said the medical center would be the second project in the downtown district to receive tax-exempt status. One Chestnut Place, the residential high-rise developed by Peter O'Connell, received a similar incentive, though O'Connell agreed to pay 10% of gross revenues in lieu of property taxes.

The FoxRock property is made up of two parcels: 37R Parkingway and 86 Parkingway. FoxRock bought the .4-acre lot at 37R Parkingway from a private seller in January 2018 for $5.3 million. It bought the 2.27-acre parcel at 86 Parkingway in September 2023 from the city for $4.25 million, according to city records. However, that payment wasn't solely for the land.

When FoxRock bought the former Quincy Medical Center from Steward in 2016, Quincy legally held a future interest in the property. In exchange for Quincy relinquishing its interest − called a "right of reverter" − FoxRock agreed to pay the city $4.2 million or commit 150,000 square feet of the property to medical uses.

The right of reverter – a clause put in the property’s deed when the city sold the hospital to a nonprofit in 1999 – said ownership of the property reverts back to the city if the property isn’t being used as an acute-care hospital.

Mason said that by paying the city $4.25 million for 86 Parkingway, FoxRock discharged its obligation under the reverter clause. In other words, FoxRock received 86 Parkingway for the nominal sum of $50,000.

FoxRock's latest plans for a new medical center in downtown Quincy

Kleinman presented a slide show of the project, including the four-story, 100,000-square-foot medical building, which would open onto McConville Way and be bound to the south by the Generals Bridge.

A drop-off area accessed from McConville Way would connect to the garage. Adjoining the garage to the east, the smaller of two retail spaces, designated as a two-story restaurant in the plans, would open onto a patio with outdoor seating. Kleinman said the design incorporates roof-deck seating as well.

The larger retail space, also two stories, would connect to the northern end of the garage. Kleinman said the building would have "a lot of glass and light" where "uses inside trickle out to the exterior." A rendering showed tailors' mannequins in the window displays, suggestive of clothing stores.

Kleinman said FoxRock does not have prospective tenants for the retail space yet.

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FoxRock, co-founded by Jason Ward and billionaire Granite Telecommunications owner Robert Hale, has made a series of proposals since late 2016, when it promised to return hospital-like services to Quincy after buying the former Quincy Medical Center for the below-market price of $12 million.

Proposals by FoxRock in 2018, 2021 and 2022, all on a larger scale than the current plans, didn't materialize.

A look back at different FoxRock proposals for the property

In December 2018, the developer had much grander plans for the property, when it envisioned medical offices, a 140-room hotel and 110 "workforce housing" apartments inside a 200,000 square-foot, nine-story edifice.

Almost three years later, in September 2021, FoxRock put forward new plans for a 125-room hotel, 200 market-rate units and a restaurant inside a 20-story tower. The plan, which also included a six-story office building and a parking garage, drew criticism from city councilors for its lack of defined medical space or any mention of affordable housing.

In January 2022, FoxRock scrapped the hotel and 200 residential units, instead proposing a 250,000-square-foot medical office and life-science building. The plan also included a 510-space parking garage and a 13,000-square-foot restaurant.

At the time, Kleinman said that the plan for a tall, narrow building drew criticism and didn't make sense for the area.

"That was really the only part of the project we'd received any negative feedback on, partially about the height and partially for the use," he said.

The current plans retain the layout of those put forward in 2022, except the dimensions of the medical building are scaled back.

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This article originally appeared on The Patriot Ledger: Quincy planning board OKs 40-year tax exemption for medical center