CONCORD, NH — Many times, with real estate deals, it is all about being at the right place at the right time.
The controversy over whether the legislature should approve a last-minute proposal to use some of the state’s surplus funds for the construction of a new multi-million-dollar parking garage for state representatives and senators got a little more interesting with the revelation that two of the state’s largest developers could benefit with a financial windfall in the deal — possibly to the tune of millions of dollars.
During the past two weeks, state officials requested an amendment before the House Finance Committee for $35 million for a new 600-space parking garage at 33 Capitol St., currently the attorney general’s office. The legislative parking garage, over the northern leg of Storrs Street, had run its course and is in disrepair, officials said — despite millions of dollars in repairs that just ended earlier this year. About $3.5 million would be needed to raze the building on Capitol Street while $1.5 million was needed to take apart the garage.
Terry Pfaff, the chief operating officer for the General Court, called the garage a “critical need” and replacing it “limits liability, in my opinion,” due to the structural issues.
The demolition of the AG’s Office, known to long-time residents as the former New Hampshire Savings Bank, requires the department of justice to be moved somewhere else in the city where there is at least 50,000 square feet of space since the department is using nearly 58,000 square feet on Capitol Street. Ideally, the department does not want to be split apart into multiple buildings like some other departments and divisions. The state also does not want to build or repair any of its other holdings. Officials also do not believe the DOJ needs to be right across the street from the Statehouse.
A complete audit of all the city’s buildings and empty office space has not been completed. But officials and developers said there were only three buildings known to have available space — the Steeplegate Mall, which is nearly empty, and the north and south buildings of the former Lincoln Financial building at 1 Granite Place in the North End of Concord, which has about 210,000 square feet of space.
The north building is owned by Firefox Management, Steve Duprey’s company, the biggest landlord for properties the state rents. Brady Sullivan, considered to be the largest developer in New Hampshire, owns the south building.
Duprey’s company purchased the north building in May 2015 for $1.7 million. He currently has a multi-year lease, with an option to sell, to the NH Judicial Branch Administrative Offices, something Pfaff said could be a problem since people might frown at the judiciary and prosecutors being in the same building.
The south building and two parcels with more than 130-acres were on the market for nearly a year and a half for $6 million but no one would bite. It was sold to Chelmsford Concord LLC, a subsidiary of Brady Sullivan, for $2 million in May 2021. About 107-acres next to the south building, which has a small building and forest, is zoned for housing and was sold to the subsidiary for $1.4 million.
Charlie Arlinghaus, the commissioner of administrative services, at one of the hearings, proposed purchasing one of the buildings for $20 million. Both he and Pfaff estimated it would cost $1.25 million to move the AG’s Office to the new digs.
“If you don’t do that,” Arlinghaus said, about moving the DOJ to 1 Granite Place, “I don’t know where exactly they’d go.”
The $20 million was a stunning figure to hear considering what both Duprey and Brady Sullivan paid for the buildings. In Brady Sullivan's case, it would be a 900 percent return on investment on a building no one wanted to buy for nearly a year and a half. In Duprey's case, if he moved the court out of the north building, it would be a 1,400 percent profit.
Profits Might Not Be That High
The immediate math of what a building might be sold for compared to what it was purchased for does not always reveal some of the back and forth between two developers owning adjacent parcels or what the state will do in the end.
Duprey said the south building would not be sold to the state by Brady Sullivan because he has an agreement to purchase it from them. When asked why he thought Brady Sullivan would not sell and look the other way at a 900 percent profit flip after it had been floated by a state official, Duprey said, “I own the lobby.”
The south building, it turns out, would have no front door or access without a complete redesign, costing who knows what to configure. While he would not get into finances, Duprey said the price to purchase the south building from Brady Sullivan would not be as low as $2 million and there would be no 900 percent profit. The dealings, too, were “awfully premature” to speculate on at this time.
“I would love to continue the conversation,” Duprey said.
Firefox and Brady Sullivan, when the building was for sale, discussed some redevelopment possibilities, Duprey said. The Manchester developer was looking to turn the south building into apartments. But there were many reasons why that might not be possible, especially in a mixed-use environment. Duprey, instead, suggested constructing apartments in the front part of the parcel.
The ideas did not go anywhere but, he added, Brady Sullivan “got a great deal” on the building.
Even if the $20 million price tag for one of the old Lincoln Financial buildings and the $35 million for the garage might seem high, Duprey said, they were not.
While he agreed the garage needs to be replaced, Duprey questioned the state’s estimates even with Russia invading Ukraine and supply chain issues. The garage will not be built for two and half years and, by that time, construction prices could go down. He suggested officials were budgeting a higher amount to have the project come in at a lower cost — which would make them look like heroes later.
The purchase price, too, was low, he said. The state could not build a new building, of that size, for $20 million. Recently, Duprey had the Smile Building, an office complex with first floor retail on South Main Street, plans priced again, to see what it would cost to replace. Back when it was built, Smile was $175 per square foot. Today, it would cost $450 per square foot for a building with 100,000 square feet, he said. Those prices, too, will probably go down but they are what they are right now.
“It would cost $45 million to replace the building,” Duprey said. “The state can’t build a 100,000 square foot building (for $20 million). It’s a smart move — if the state decides, sometime, to buy the space.”
More Spaces Downtown; A Collapse?
Legislators, according to officials, are grabbing 68 parking spaces around the Statehouse for many days, across many months, spaces taken away from customers frequenting downtown businesses and restaurants.
Every time the state comes to the city to ask for more spaces, the city has to give them the spaces, Duprey said.
With 600 spaces in a new garage, that request would end and those spaces would be open for customers bringing in badly needed revenue into the city’s parking fund and business to downtown. Duprey said the lack of spaces in that area of the city was ruining some of the property values, too.
Originally, Duprey said, the agreement between the state and the city was the current garage would be dismantled when another space was found and then, rebuilt near the old liquor and wine outlet building on the southern end of Storrs Street but that never happened. Neither did the other space. A 30-year solution became a 50-year solution and, whatever is done, the garage had to be replaced, he said.
“It has no lateral bracing,” Duprey said. “The garage is beyond its useful life. If there are structural issues, it would probably tip over … hopefully, not on my buildings.”
Duprey owns buildings in Eagle Square and Dixon Avenue, right next to the garage.
Duprey’s company also owns the Courtyard by Marriott and the Grappone Conference Center which was closed during the coronavirus pandemic for about 14 months.
The state was criticized last year for giving Duprey a no-bid contract worth around $454,000 to use the center for the National Guard to perform contact tracing for COVID-19 infections and people possibly exposed to the virus. The contract included access to ballrooms, guest rooms, and meals and coffee for 75 people during the height of the pandemic. Since Duprey was a long-time Republican donor and activist, he received favorable treatment, according to critics.
However, the deal came to be in a similar way as the legislative garage issue now — the New Hampshire Department of Health and Human Services searched and could not find a space in Concord big enough to work out of for a long period of time with enough technology interactivity, meals, etc. to assist the Guard. Which led them to Duprey’s empty conference center.
Lost City Tax Revenue? Maybe, Maybe Not
Another issue raised about the swapping of parcels with the state was that more state-owned property in Concord would lead to less property tax revenue.
Nearly a third of the city’s land is owned by the state, nonprofits, and churches, and is not taxed. It is one of the reasons why Concord’s property taxes are so high compared to other communities (as well as an autonomous school district). Payments in lieu of taxes, on just the state parcels alone to the city, would easily be worth millions and would lead to lower property taxes, presuming the city did not spend the money.
The southern building at 1 Granite Place, as an example, is assessed at nearly $9.4 million. The city’s tax rate is $25.12 (Penacook residents are paying $27.97, due to slightly higher Merrimack Valley School District taxes but a slightly lower statewide education property tax rate). Taking the southern building off the tax rolls today would lead to a loss of nearly $236,000 in revenue — more than a half a percent of the city’s tax rate fiscal year 2022 budget, which would be passed onto other property taxpayers, similar to the way tax increment finance districts are.
This would be on top of already historically high property taxes in the city.
A 1 percent tax rate is equal to around $446,000, according to Stefanie Breton, the public information officer for the city.
Mayor Jim Bouley, who has raised the issue of the lack of payments by the state to the city in the past, said he would hope a provision would be made so Concord would not lose nearly a quarter of a million dollars each year.
“If the state moves up there,” he said, “my expectation is that there would be a covenant with tax revenue into the future.”
Duprey said, in all of his lease-to-buy agreements with the state or nonprofits, he ensures there is a payment in lieu of taxes provision.
“I never sell a building to the state of New Hampshire and no (buying) option exists without an agreement with the state with a payment in lieu of taxes,” he said. “I do that with not-for-profits, too, categorically … in all my dealings. I protect the taxpayers of Concord because I am one of them.”
Alternative Ideas For Legislative Parking
As with government, there are always alternative ideas.
And many of them are also more responsible and more affordable … if anyone will listen.
The idea of replacing the garage has been discussed for many years. But millions have already been dumped into repairing it so it should be safe for a little bit longer than officials say. Arlinghaus challenged the notion the garage was not safe — saying the state would not let anyone park there if it were going to collapse. Although, at a luncheon on Tuesday with the Greater Concord Chamber of Commerce, Sununu said, “I won’t park there.”
But it makes one wonder: Why not spend a few more million to refortify the steel structure with concrete and give it another 20 years?
OK, it is an eyesore. But so is most of the back of the city from Exit 13 to Exit 14, even though there has been a concerted effort to remove homeless camps along the Merrimack River and the railroad tracks.
It was supposed to be temporary. Yes, that is historically correct. But no one is proposing to rebuild it on the southern leg of Storrs Street even though that was also part of the plan.
How about looking nearby the current garage? There is nearly 5-acres of space, a lot of it vacant, mostly used for parked vehicles. An expansion of these parcels would open up hundreds of spaces for much less money when compared to the $55 million total costs being bandied about now to demolish a perfectly sound building or selling one of the Granite Place buildings for much more than what they were for sale at just a few years ago.
About an acre, from the Loudon Road bridge north, is owned by the city. Another half-acre, just south of the bridge, is owned by Granite Center LLC, another Duprey property. Another 2-acres next door to that property is owned by the New Hampshire Historical Society. Another half-acre of the land, where Weed Automotive is located, is also owned by Duprey although the building is owned by Capitol Street Associates, a group of attorneys.
In other words, some of the same players involved in the current proposal are also involved with these parcels.
As well, none of these parcels include the acreage alongside railroad tracks and the former New Hampshire Department of Transportation building being developed into 80-plus-units by Brady Sullivan.
Brixmore also has dozens of empty spaces right next door to the current legislative garage and behind Marshalls and Burlington Coat Factory, too. If the legislature leased those spots, the company could use the funds to continue its effort clearing out the campers from the tracks, land it does not even own.
All or a portion of these parcels would be more than enough parking spaces for legislators to lease or buy without having to knock down 33 Capitol St. or pay $20 million for a building in another part of the city.
In other words, there are all kinds of options available, at a fraction of the price, with a little bit of out-of-the-box thinking.