Combined Partners & Federal Realty Investment Trust payments estimated to yield $1.7M to $2.2M in annual City revenue from former IKEA parcel

The City of Somerville and Partners HealthCare have signed a Community Services Understanding through which the tax-exempt nonprofit healthcare provider has agreed to make annual payments to the City as a municipal services contribution for the offices they plan to build on the former IKEA parcel in Assembly Square. The agreement also stipulates that Partners will engage in good faith efforts to make employment opportunities available to Somerville residents, and that their general contractor will enter into a Project Labor Agreement for construction.

Partners HealthCare, the state’s largest private employer, will be the first major industry tenant to take up occupancy in Somerville’s new Assembly Row neighborhood. Partners plans to build up to 1.1 million square feet of office space and a parking garage in two phases. Federal Realty Investment Trust (FRIT), the developer of Assembly Row, will partner on the project to build ground floor retail and restaurant space as part of the development.

Combined payments from Partners and FRIT are estimated to yield more than $1.7M in annual revenue by the completion of Phase I, which is expected by 2017. Phase I will include more than 760,000 square feet of office space housing 4,500 Partners employees, as well as FRIT’s more than 100,000 square feet of commercial space. Phase II would allow Partners to build more than 330,000 square feet of additional office or dry research space, yielding just under an additional estimated $.5 M in payments. In total, at full buildout, it is estimated that combined contributions from Partners and commercial tax payments from FRIT could potentially exceed $2.2M per year, which is slightly more than Assessors’ estimates indicate that the site would have generated in commercial taxes had IKEA developed the site.

Partners and FRIT combined are also expected to pay a total of approximately $4.3 million in linkage fees, which by ordinance will be designated for affordable housing projects, and $5 million in permit fees for Phase I construction.

“I want to thank Partners for the very constructive discussions that led to this agreement, which will bring significant and beneficial new revenue to the city as well as new job and career-development opportunities for residents. But the significance of this moment goes beyond revenue,” said Mayor Joseph A. Curtatone. “Attracting Partners puts us squarely on the path to achieving the smart, transit-oriented development and quality job growth that the community called for in our SomerVision Plan. Rather than the big box retail IKEA would have brought us, the State’s largest employer and a major player in the healthcare industry has chosen Somerville. We can now seize upon this momentum to bring other high-quality employers not just to Assembly but also to Union Square, Inner Belt and Boynton Yards.”

Jobs and workforce development

Partners and its founding hospitals, Massachusetts General and Brigham and Women’s, are well-known for their robust workforce-development efforts in partner communities. Partners expects to move 4,500 existing employees to the new Somerville location. As part of the agreement, they have agreed to make good faith efforts to make employment opportunities available to Somerville residents, share career-development opportunities with the community, and offer education around healthcare careers to Somerville youth.

“What’s important to note about Partners is that they work with the community and local youth not only to provide access to just any job but they work to help residents envision and build careers. Through programs for youth and the community, their goal is to aid residents in developing skills and experience that will prepare them for healthcare career opportunities at Partners hospitals and offices regionwide,” said Somerville Economic Development Director Ed O’Donnell.

Project Labor Agreement

A Project Labor Agreement with the Building and Construction Trades Council of the Metropolitan District and the New England Regional Council of Carpenters, on behalf of their affiliated local unions, is expected to be signed in September.

“As we move forward with development in our city, we must keep our community’s needs front and center. The construction of large office buildings occupied by high-quality employers that bring jobs to Somerville and improve our commercial tax base is essential,” said At-Large Alderman Bill White, who is President of the Board of Aldermen. “I commend Partners for choosing to have a Project Labor Agreement, and the Board looks forward to their workforce development efforts for Somerville residents.”

Construction to start in fall 2014

Partners expects to begin construction in fall 2014 and finish by 2017, with staff moving to the site as sections are completed. Under the agreement, Partners will pay $1.38 in municipal services contributions per square foot of office space, which is approximately 25 percent of what a fully taxable commercial development would yield. Beginning in 2021, the $1.38 rate will increase by 2.25% each year. Upon expiration of the 20-year agreement, there will be an opportunity for the agreement to be renegotiated and renewed.

“Without the first shovel even in the ground, Partners has already made a significant contribution to our community and proven to be an admirable community partner through this agreement,” said Mayor Curtatone. “I’m looking forward to officially welcoming them to the City and toward our continued collaboration in the years to come.”

~City of Somerville