The Gutierrez Cos. had hoped to begin redevelopment of the former Boston Regional Medical Center in Stoneham in the fall, but a slowing economy and abutter lawsuits have hindered the project.
When the Gutierrez Cos. of Burlington swooped in and acquired the former Boston Regional Medical Center in Stoneham out of bankruptcy last year, it seemed like one of the savvier plays of the day, especially given the booming commercial real estate market that enveloped the region in the months following the $20 million deal.
More recently, however, a fatigued economy and headaches caused by several abutter lawsuits have seemingly weakened the developer’s plans to build a $100 million corporate campus on the 40-acre parcel. What was one of the country’s strongest sectors just a few months before has cooled considerably, with local brokers reporting a palpable drop in the number of companies out seeking space.
“Getting a commitment is going to be tough,” said Spaulding & Slye Colliers suburban broker Tamie R. Thompson. “You need a big deal to kick a project like that off, and there aren’t many of them out there right now.”
Exacerbating the situation is the sudden rise in space coming back to the market, with Spaulding & Slye reporting negative absorption of 470,000-square-feet for the North suburban market at the mid-year point. Attributed largely to the return of sublease space from high-tech companies, the North’s availability rate is now 19 percent, dramatically above the 7.9 percent recorded halfway through 2000.
Principal Arthur Gutierrez Jr., who is serving as project manager for what is being called the Stoneham Executive Center, acknowledged last week that conditions are far different than they were when the firm first purchased the property. A warm reception from the town of Stoneham and a bevy of major firm with space requirements last summer initially had the Gutierrez Cos. hoping to begin redeveloping the property as soon as this fall, he said, but the most optimistic schedule now is seen as early next spring.
“Things have slowed down a bit,” Gutierrez said. “But we are believers, and we are going to be there in the long run.”
Besides the waning economy, the developers have been hit by a rash of lawsuits emanating from abutters in Melrose and Medford. Although Stoneham officials are enthused by the company’s proposal, the surrounding communities charge that traffic and associated congestion will create difficulties for nearby residents. One key worry involves potential drainage problems for homes surrounding the site.
“There are still very, very strong concerns from the city of Melrose,” Mayor Richard Lyons said last week. “There is a lot of community opposition.”
Lyons charged that nearly all of the impacts will be felt by his community and Medford, maintaining that “Stoneham has absolutely nothing to lose and everything to gain,” particularly given that a formerly tax-exempt property would generate millions of dollars in revenue for the host town. The former hospital is located in a rural section of Stoneham as well, further reducing its strain on residents there, according to Lyons.
Despite that outlook, Gutierrez expressed optimism that the conflicts can be resolved. The watershed challenge can be met by engineering, he said, adding that the firm believes its critics are equally committed to seeking a solution on the remaining issues.
“We’ve had very good meetings, and we hope to resolve something very soon,” he said.
On that point, Lyons concurred with the developers, crediting the Gutierrez Cos. for being up front and willing to negotiate from the outset. “They are very pleasant people and they seem to be very accommodating,” he said.
‘Serious Interest’
In the meantime, Gutierrez said the company continues to pursue a double-edged strategy, working on its state and local approvals while promoting the property’s benefits to potential tenants. Being marketed by CB Richard Ellis/Whittier Partners of Boston, the property has several selling points, Gutierrez said, including excellent visibility, a campus-like environment and close proximity to Boston and Cambridge.
“It’s a fantastic site,” Gutierrez said. “There aren’t many tracts of land like it anymore.”
Gutierrez said tenants continue to tour the site, but agreed the pool of potential anchor tenants has been cut back dramatically since the beginning of the year. One developer familiar with the plan said Gutierrez should be able to tread water for the short term, but added that a prolonged slump could prove more challenging.
“As strong as you are, you don’t want anything to stay negative too long,” said the developer, who requested anonymity. “Twenty million dollars tends to burn a hole in your pocket pretty quickly.”
Beyond the Stoneham deal, the economy has already cost Gutierrez one potential office build-to-suit deal, with Priority One backing out of a 115,000-square-foot lease. Gutierrez also bit off a big chunk of the MetroWest market last year when it acquired 700 acres in Marlborough from MetLife.
According to Gutierrez, however, the firm continues to chug along, with 98 percent occupancy in its 3.2 million-square-foot commercial portfolio. A satisfactory settlement was reached to allow Priority One to renege on its building, he said, while the firm recently completed permitting for the first phase of the MetLife parcel, one that will allow Gutierrez to build 620,000 square feet of space. The overall site can ultimately support upwards of 5 million square feet, he said, with Gutierrez Cos. planning to develop several “mini-campuses” there.
Interestingly, Gutierrez said the MetLife land is garnering “serious interest” among potential tenants, with two build-to-suit proposals currently being negotiated. A deal there could be announced soon, he predicted.
