Assembly Square, the Back Story
Part 6:  Two New Players

An editorial by William C. Shelton

In the fall of 1999, Assembly Square Limited Partners (ASLP) faced two serious problems.  They had bought the mall property with $300,000 in cash and a one-year, $18.5 million loan that was due in October.  But they could not legally obtain as-of-right permits to build big box stores. 

Newly-elected, Mayor Dorothy Kelly Gay had told the Globe, ‚ÄúWe can‚Äôt allow National Development  to come in here and tell us what we‚Äôll have at Assembly Square.‚Äù  National was the ASLP partner managing the permit process.  Mayor Gay‚Äôs development director, Steve Post, said, ‚ÄúIt‚Äôs clear that big box retail stores on the scale of potential development ranks near the bottom because it creates few jobs and doesn‚Äôt bring much tax revenue.  Large retail stores will have a negative impact in East Somerville by generating lots of traffic and pollution.‚Äù

   Mayor Gay called for an August 25 public meeting, at which ASLP presented a plan that closely resembled the big box strip mall ultimately built last year. Those attending the presentation, including Alderman Joe Curtatone, unanimously rejected the plan.

   The next week, IKEA announced that it had bought the 16.6 acres next to the mall site. Mayor Gay immediately met with both developers and persuaded them to accept a year-long development moratorium while the city prepared a master plan.

   A master plan is essential to an effective land transformation and would have avoided much of the subsequent acrimony.  Sadly, it never happened.

  Meanwhile, ASLP solved its debt problem.  Without telling the city, ASLP essentially sold the majority of the mall site property to Home Depot.  To give Home Depot tax advantages, ASLP signed a 99-year ground lease with a $1 purchase option at its conclusion.  Home Depot bought the $18.5 million note and executed a mortgage with ASLP.

  These contracts, contained some unusual provisions. Home Depot committed to pay half the property‚Äôs carrying costs and any litigation costs. ASLP‚Äôs partners had to obtain permission from Home Depot before purchasing property anywhere in the world.  And Home Depot was the actual developer, while ASLP was the public face.

   Taurus New England, ASLP‚Äôs majority partner, never seriously considered building anything other than a big-box-dominated project.  This was not just because of Home Depot‚Äôs contractual constraints.  Taurus had had enjoyed great success by buying failed projects, repackaging them, and selling them for a quick and substantial profit.  The last thing they wanted was to execute an office-based master plan.  Also, principal Lorenz Reibling was and remains deeply pessemistic about the Boston-area economy‚Äôs future demand for office space.

   So Taurus faced the challenge of obtaining permits to build a project to which most Somervillians then objected.  They determined to meet that challenge by replacing erstwhile partner National Development with a politically connected developer.

   Environmental activist and unsuccessful congressional candidate John O‚ÄôConnor was married to Carolyn Mugar, who with her brother David, was heir to many Star Market properties.  The Mugars were major contributors to the Massachusetts Democratic Party, and Carolyn sat on the Conservation Law Foundation Board of Directors. 

    Mr. O‚ÄôConnor had persuaded his wife to create a development company that, starting with the supermarket properties, would showcase ‚Äúgreen‚Äù development.  They called it ‚ÄúGravestar.‚Äù  One of its first projects was the Porter Square strip mall, which drew mixed reviews from neighbors.

   O‚ÄôConnor had become close with a political operative named Natasha Perez, whom he installed in a cottage on his and Ms. Mugar‚Äôs residential property.  During the Spring, 1999 special election to replace Mayor Michael Capuano, Ms. Perez had also become quite close with candidate Joe Curtatone, when she served as his campaign field officer.  She subsequently went to work for Gravestar, and at the same time, as Deputy Executive Director of the Massachusetts Democratic Party.

   Taurus calculated that Gravestar had the political juice that they needed. They brought Gravestar into ASLP, gave them a small equity position, and charged them with managing public relations and delivering the permits.  Gravestar, in turn, charged Natasha Perez with leading this effort.

   This was the biggest opportunity that Gravestar had thus far encountered.  Unfortunately, John O‚ÄôConnor, beloved in the environmental community, had the bad judgment to die at the age of 44, before he could fully appreciate the environmental disaster that ASLP‚Äôs plans would create.

   Joe Curtatone was deeply impressed with Lorenz Reibling when Natasha Perez introduced them.  This is understandable; Mr. Reibling is brilliant, charming, highly successful, and has an avuncular manner.  Curtatone sought a personal relationship, taking Reibling‚Äôs family to see the tall ships when he was out of the country, and attempting to persuade Reibling to purchase the Prospect Hill house across the street from Joe‚Äôs sister‚Äôs home.  They dined together regularly at Henrietta‚Äôs Kitchen in Harvard Square, discussing a variety of topics, including Joe‚Äôs political ambitions.