KJ: Virginia developer selected for Augusta project to turn old DOT site into state-leased offices

By Keith Edwards, Kennebec Journal, 1/23/17

AUGUSTA — The state is entering negotiations with a Virginia firm and a Maine contractor in hopes that a deal can be struck to tear down the vacant former state Department of Transportation maintenance facility on Capitol Street and build a nearly 90,000-square-foot office building in its place.

If the parties can come to terms, the new building would be leased back to the state to serve as the new main office for the state Department of Health and Human Services.

The 9.2-acre property at 109 Capitol St. sits prominently on a hill within a few hundred feet of the State House Complex.

State Bureau of General Services officials selected Arlington, Virginia-based FD Stonewater out of three teams that submitted their qualifications to the state for the project. If that developer works out a deal with the state, it would partner with Scarborough-based Landry/French Construction, which built the building leased to the Department of Health and Human Services and Department of Labor near the Portland International Jetport, and Virginia architectural firm HGA Architects and Portland-based Mark Mueller Architects.

City officials hope the developer will do more than create a plain state office building on the site, given its prominence in the city and proximity to the State House.

“That property is very significant to the city and state. It’s one of the most visible and accessible properties to the Capitol,” said Keith Luke, the city’s deputy director of development services. “Where it is situated, the development potential there is extraordinary. What happens there, with the scope and nature of the design, is going to influence how people experience the Maine Capitol for generations. I hope FD Stonewater appreciates that and comes with great ideas. I hope it expands from simply an office building, which is the state’s concern, to more of a mixed-use development.”

Luke said a mixed-use development could include additional office space as well as retail space.

What specifically the developer, contractor and architects will actually build, if they come to terms with the state on an agreement, is yet to be determined.

Teams interested in building the project didn’t submit plans or proposals for what they’d build, if selected. Instead, they only submitted their qualifications, outlining their experience in completing similar government-related projects elsewhere.

David Heidrich, spokesman for the state Department of Administrative and Financial Services, said representatives of the companies will meet with state officials, including those from the Department of Health and Human Services, to talk about the state’s needs for the new space and then put together a proposed building project. He said FD Stonewater officials have visited the site, which has eight buildings spread across, above and below a hill, to understand what it would take to build there.

What is known, or at least what was specified in the documents sent to firms that submitted their qualifications to be considered for the project, is there is a maximum per-square-foot price the state is willing to pay to lease the new office space: $19 per square foot.

“They understand that dollar amount is out there,” Heidrich said of FD Stonewater. “We’ll be negotiating with that dollar figure in mind and have every intention of securing a lease with that as the dollar amount. We’re looking at reducing costs for space occupied by the state. That’s why we put that dollar figure out there.”

Luke said he has some concern the fixed maximum price could result in “value engineering” on the project, but he remains hopeful the developer and state will share the city’s interest in the project being a “very high quality development.”

He said city officials plan to meet with FD Stonewater officials Monday to discuss the project, what both parties have in mind for the site, and encourage the developer to do a multi-use type of project at the location.

Heidrich said negotiations between the state and company officials will likely start within a few weeks. The request for qualifications issued by the state indicates it seeks a lease for up to 30 years.

FD Stonewater officials, in a news release, said the firm is a leader in designing, developing and owning facilities leased and occupied by government tenants. They said this would be the 18th such build-to-suit lease project it and its affiliates have done on behalf of government tenants.

“We are thrilled to have been chosen to be the state of Maine’s development partner on this important assignment which, while delivering a high-quality build-to-suit for a state agency, will also revitalize a large land parcel in the heart of Augusta,” Claiborne Williams, a principal at FD Stonewater, said in a news release. “Our national expertise in government-occupied real estate, along with the proven track records of our team partners in delivering projects across the state of Maine, are tailor-made for this endeavor. We are truly excited about the opportunity to deliver a new facility which will meet the State’s mission for the next 30 years and beyond.”

Company officials said construction could start in mid-2017. Heidrich said the state would look to occupy the site by July 2019.

The state received qualifications from three development teams and used a scoring system to select the FD Stonewater team over the two competing teams:

• developer SPC Associates, of Hackensack, New Jersey, partnering with contractor Nickerson & O’Day, of Brewer, the general contractor currently working on Camp Chamberlain, the new headquarters for the Maine National Guard off Civic Center Drive;

• and developer Maine Course Hospitality, of Freeport, partnering with contractor Opechee Construction Corp., of New Hampshire, builder of the building leased by Maine Revenue Services and Office of Information Technology at the Central Maine Commerce Center in Augusta.

The plan is the state’s latest effort to get rid of the old, big, green DOT facility, vacant since October 2014 when the department moved its maintenance operations from there to a new facility in north Augusta at 66 Industrial Drive.

Last March state officials rejected all three proposals submitted in response to a previous state proposal seeking a developer to provide 225,000 square feet of state agency office space within one mile of the State House after determining they would not have saved the state money.

“We’re certainly encouraged we’ve made it to this point,” Heidrich said of the state moving ahead with the most recent plan to have the DOT site developed to provide office space. “We’ve learned from some of our past mistakes and were able to get a team we feel is very qualified to take on this project.”

Information included in the packet of materials provided to companies interested in submitting their qualifications for the project included an office plan that indicates space would be needed for 689 state workers. Most of those workers would come from the main office of DHHS on State Street, which Heidrich said is outdated and in need of replacement.

Also included in that total are 280 Center for Disease Control employees now primarily based at Key Plaza at 286 Water St., a prominent downtown Augusta location.

Heidrich said that doesn’t mean the state may not move workers from other departments into that space if it can negotiate a new lease. The state’s lease for 58,000 square feet of space in Key Plaza expires in June 2018. Currently, however, the Key Plaza building is potentially headed to the auction block and is scheduled to be foreclosed upon Feb. 1. However, city officials have expressed optimism state officials will remain in the Key Plaza building into the future.

City officials have expressed concern about the state moving workers out of leased space downtown, but expressed optimism that the new office space, because it would be owned by a private, property-tax-paying firm and leased to the state, would provide the city with tax revenue. Properties owned by the state are exempt from local property taxes.

Keith Edwards

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