Maine State Pier Development II

While we all watch from the sidelines the ongoing debacle that is the MSPD Process continues on. It's unfortunate that such a large project with long term implications for Portland seems to have been mishandled from the very start. It's certainly true that the timeline for proposals all but excluded most any other regional or national developer from submittal.

While the short submittal timeline was predicated by a "cash short fall" emergency: lack of tenants for the state pier, the reality is that there was no cash shortage, just lost revenue. At the same time an urgent drumbeat proclaimed the imminent collapse of the entire structure. No less than $15 million was needed to "repair" the pier!

It's curious how the evolution of the pier development process parallels politically driven processes... While I have no partiality towards either developer(though in full disclosure my father is involved in supporting Ocean Properties) one can't help but think that the entire process was orchestrated behind the scenes. Rumors abound of vague whisperings from former city councilors...of a process that was jumpstarted for a particular developer. How then do you develop a property under strict waterfront zoning restrictions?

Induce fear tactics about revenue shortfalls...lost property taxes...huge infrastructure costs that would be borne by taxpayers and top it off with the assertion that are no viable tenants.

Unfortunately there was a commercial tenant: Cianbro. Blocked from the Pier they have relocated their new operations to the defunct Eastern Fine Paper mill in Brewer.

Initially I was outraged when both developers asked for corporate handouts, incentives and tax financing. As a small business owner I grow increasingly disillusioned watching huge companies get tax breaks while small businesses are overlooked. That's a conversation for another day... It's almost amusing that once the competition heated up both companies dropped their tax break requests...quickly and without fanfare. Guess it wasn't that critical to the bottom line. If Liberty can develop the Jordan Meat Plant without tax breaks you have to wonder why the MSP developer would.

Arguably the MSP is the single most valuable piece of property in Maine. So if it's valuable what are the developers going to pay? Lots of attention is being paid to property tax revenue...but that goes with the territory. What will the city realize in terms of lease/rent payments? This is where it gets confusing.... Apparently both companies include the cost of repairing the pier AND pier maintenance as a "payment" to the city. For some of us however that's just smoke and mirrors. Business owners who lease a property pay maintenance and upkeep on the property--on top of the rent/lease payments. Additionally, any space occupied by a business tenant needs improvements and renovations to get the business running. Sometimes those costs can be factored into the rent negotiations but oftentimes those are accepted costs called "buildout".

Any new hotel development anywhere needs ground work and prep before construction can begin: earth moving, levelling, etc. In this case, the "groundwork" will be done to the pier: strengthening, pylon support etc. It's all part of the process of putting buildings on any piece of land or property. It SEEMS that both developers see this prep work as a net benefit to the city and somehow an ancillary and additional to the project process. Thus pier improvements are added into the rent figure to the city. Given that the work needs to be done anywhere...and given that the developers wants a 99 year lease it seems like any pier work is directly benefitting the developer and required anyway. Excluding overall benefits like property taxes, employment, tourism etc.. city revenues from the development will = Rent + Maintenance + Pier Improvements. I think it can be argued that maintenance and pier improvements are both necessary, normal and intregral to the buildout then all that leaves is pure rent. ie payment for the use of land/pier for 99 years.

Putting it into perspective, land traditionally gets leased on 99 year terms for big developments and such a lease is less than the cost of a existing land/building combination. Current lease rates in Portland for commercial space ranges from $12-$30+. The Old Port is around $16-$20/sq'. For instance, the Pavilion Nightclub paid approx $15,000 mos to lease it's space...Liquid Blue/Diggers also around $15k/mos. Or $225,000 year. Based on what I have read both Olympia and Ocean are offering the city $200k-$250k in "pure" rent payments. Another few hundred thousand is property maintenance and improvement costs(improvements are amortized, maintenance is expensed) which they add to the figure to come out with the impressive sounding $450k +- rent to the city. If I am incorrect I hope someone corrects me. Personally I feel that the rent figure is much to low.

If I had my way the process would be re-started with a reasonable timeline for submission. With the drop in residential development, there may be many developers looking for investment opportunities of this scale. I know that won't happen and I think both Olympia and Ocean will do an excellent job--whatever that may be. But either way..this development involved the city relinquishing an incredible piece of property for 100 years! We should make whoever gets it pay through the teeth.