WORCESTER, MA—UMass Memorial Health Care's decision to lease nearly 75,000 square feet of space at 90-110 Front St. here was the critical but necessary piece that will now make possible the $70.1-million redevelopment of the downtown property.

Front Street JV, LLC, a joint venture of Franklin Realty Advisors LLC and Great Point Investors LLC, has unveiled a redevelopment plan that calls for the conversion of some vacant retail space into office space. UMass Medical will occupy 74,600 square feet of space for its IT department at the property once the renovations are completed in 2017. In addition, UMass Memorial will also lease another 20,000 square feet of space at 90-100 Front St. by the end of this year for an IT training center. In total, UMass Memorial will bring about 500 employees to the redeveloped property that is adjacent to the $565-millon mixed-use CitySquare development project.

The $36-million redevelopment project by Front Street JV involves improvements to the two office towers at 100 (20 stories) and 120 Front St. (eight stories), three commercial/retail opportunities at 90/110 Front Street and 2 Mercantile Street and a 1,647-space structured parking garage. The non-parking properties total 636,000 square feet of space, including at acquisition approximately 200,000 square feet of vacant space for redevelopment as office and retail. The 100 Front St. totals approximately 250,000 square feet of rentable office space, while 120 Front St. offers approximately 175,000 square feet of rentable office space. The 100 Front St. building is approximately 88% occupied, while the 120 Front St. building is about 60% filled.

A significant amount of the redevelopment project's capital budget will be spent on erecting a new façade for the 90/110 Front St. building. The 90/110 Front St. building is a former mall that totals 175,000 square feet of rentable retail space, which is mostly vacant. The building is currently tarped and the only major retailer occupying the property at the moment is CVS. The Worcester Registry of Deeds and Reliant Medical also occupies space at the property. That property will now be converted for office use. Another lion's share of the project will involve common area upgrades and tenant improvements that involve converting the retail space to accommodate UMass Memorial, which is expected to take occupancy of its space at 90/110 Front St. by September 2016. In addition, improvements will be made to the parking garage. Construction on the redevelopment project at the property should begin by next March.

Gary Schwandt, principal of Great Point Investors LLC, credits partner Charles “Chip” Norton, manager and owner of Wellesley, MA-based Franklin Realty Advisors, for working with the Worcester Business Development Corp. and city officials to secure the 10-year lease with UMass Medical. He says the lease was key to Great Point and Franklin Realty agreeing to purchase the property from Berkeley Investments Inc. of Boston for $32.5 million.

Schwandt tells Globest.com that he approached the property with “something short of optimism” because back in the late 1970s he was working at a Bloomfield, CT-based bank when the first loan on the Front Street property went into default. Since then there have been some ownership changes as well as some parcels sold for what is now the CitySquare development project.

He notes that the property had been on and off the market for some time and had been under contract a number of times, but failed to close due to the significant vacancies at the property.

He says the previous deals failed because the property “owned all of the (retail) vacancy in the Class A market (in Worcester) and it was going nowhere.” However, the lease with UMass changed the nature of the project that will now involve converting the retail space to office and UMass Memorial occupying about half of the now mostly vacant retail space.

Schwandt says that there was a considerable amount of due diligence due to not only the original construction, but also the separation of parcels from the property for the CitySquare development. He notes that there were “easements up the ying-yang,” and other obligations that made the lease and property sale transactions very complex. In the end it took nine months to close on the lease and sales deals, he says.

Equity will be provided by Great Point Investors LLC of Boston as investment manager of the Combined Funds of the New England Carpenters as well as Franklin Realty Advisors whose primary investors are Worcester based. Wells Fargo Bank, N.A. and Fidelity Bank of Worcester are providing $46 million in debt financing for the project.

“We see great established value and growth potential in these properties with their superb location and access for existing and future tenants,” says Schwandt. “The extensive renovations will create world-class office and retail spaces to meet the growing demand in Central Massachusetts.”

Earlier this week, state officials announced that award of $3 million in MassWorks funding for Worcester, the first 2015 MassWorks Infrastructure Program Awards. The city was awarded two grants to support the redevelopment of CitySquare: $2 million to help fund Quinsigamond Avenue's reconstruction to improve interstate accessibly and, $1 million will directly support the ongoing CitySquare redevelopment project. Schwandt says the $1-million grant will help fund the parking garage improvements at his property.

Franklin Realty's Norton says the redevelopment project will “further the ongoing revitalization of Worcester's important downtown area. This project continues our work in, and commitment to, this city and the vision for its future. We have a longstanding and proven development record in the city of Worcester and look forward to this exciting next phase.”

Eric W. Dickson, MD, president and CEO of UMass Memorial Health Care, states that the hospital had several options for a new office space to house its 500-person IT department, “but made a conscious decision to be a part of this because we believe in this city and fully support city leaders' work to improve and enhance the downtown area. I am proud to reaffirm our commitment to this city and our patients in furtherance of our mission as the leading health care system in the region.”