West Lebanon development plan still stuck in park
|Published: 06-19-2023 10:03 PM
WEST LEBANON — It’s been 14 years since developer David Clem introduced an ambitious proposal dubbed River Park, a mixed-use development on 38 acres between Route 10 and the Connecticut River, just north of the Main Street commercial district.
The plan — which remains largely unchanged nearly a decade and a half later — includes eight buildings totaling 840,000 square feet of retail, office, research and residential space, as well as two parking garages, nine single-family homes and a park with public river access.
The first building, 1 River Park, has only been partially excavated and is several years behind schedule.
Clem, who purchased the former Bailey Brothers auto parts property in 2007, developed the proposal after gathering input from meetings with community members. With River Park, Clem aimed to replicate his success in Cambridge, Mass., where his previous project, One Kendall Square, a 676,000-square-foot, mixed-use campus for life sciences, offices and retail, helped cement Kendall Square as a thriving innovation hub.
In 2010, Lebanon voters overwhelmingly approved a petitioned zoning change to allow mixed-use development at River Park.
Since then, River Park has been beset by delays. Frequent conflicts between the developers and city officials over regulations, procedures and permitting conditions took months, and even years, to resolve.
Construction has stalled four times since 2016, including a recent stoppage that is still ongoing.
The catalyst behind the latest construction halt is a city-owned stormwater pipe that crosses directly through the building site of 1 River Park, a few feet underground. The pipe’s depth was discovered during an excavation of the site in November.
The city must approve Lyme Properties’ plan to reroute the stormwater through a temporary replacement line before the existing pipe may be removed, according to Chet Clem, president of Lyme Properties and the son of David Clem.
“This is the fourth time we have tried to start on this building permit,” Clem said. “These delays are a huge reputational risk for us and extremely difficult when having conversations with (prospective) tenants and asking them to make a multimillion-dollar decision two years into the future.”
The developers said they have the financing to build River Park. While the building construction remains on hold, Lyme Properties has spent $1.9 million to date on infrastructure to support the project, including new water and sewer lines and an extension of Crafts Avenue into the park.
“All of the funds expended thus far (including planning and design, engineering and construction) have been equity investments of the Clem family,” David Clem said. “There is no debt on the property.”
The remaining project will be financed through “traditional real estate financing” such as equity investment partners, Clem said.
While Chet Clem declined to name prospective tenants or investors for 1 River Park, he said that he has equity investment partners behind the project, as well as Claremont Savings Bank and other banking institutions.
“We are always in those conversations with financial partners and tenants (about all the buildings in the project),” Clem said. “The challenge I have with tenants, the banks and construction partners is having them ask if this project is really going to happen.”
The passage of time has created new challenges for River Park, as well as a new generation of leadership. In 2019, Chet Clem took over management of the project for his father, who is now semi-retired.
The younger Clem, 41, was born in Cambridge, Mass., but grew up in Upper Valley, first in Norwich and later in Hanover. He graduated from Kimball Union Academy and from Bates College in Maine with a degree in environmental policy. He moved around after college, including New York City and Massachusetts, before returning to the Upper Valley in 2019 with his wife and two children.
The years since he took over the project have seen wild upswings in construction costs, driven by labor shortages and supply-chain issues triggered by the pandemic.
Clem estimates at least an additional $3 million to finish the infrastructure requirements for 1 River Park, including a property entrance at Route 10 and a portion of the on-site road.
Meanwhile, Clem is in talks with city staff over the status of his building permit, which has been extended multiple times since its issuance in 2019.
During that time there have been changes to the International Building Code, the base standard used in New Hampshire, and Lebanon Planning Director Nathan Reichert said another revision to the building code is expected this year.
In March, Building Inspector Calvin Hunnewell notified Clem that his building permit would be revoked unless Clem provides documentary evidence that work is ready to commence. The documents sought include updated project costs, a new timeline for construction of all the River Park buildings and confirmation that licensed contractors are hired and ready to begin work.
The International Building Code states that a building permit will become invalid if work has not commenced within 180 days of the permit’s issuance or “if more than 180 days pass between inspections.”
Clem is currently appealing the city’s document requirement to the Lebanon Zoning Board of Adjustment. The board heard the appeal on June 5 and will continue the hearing at its July 3 meeting.
“It’s at a bit of a crossroads moment for this project, when it’s already hard enough before it becomes impossible,” Clem said.
Many large residential and commercial developments have been completed in the city in the decade and a half that the Clems have been trying to shepherd River Park from concept to reality.
In 2022, Michaels Student Living, a New Jersey-based developer, opened Summit on Juniper, a $50 million, four-building housing complex for Dartmouth College students on Mount Support Road just two years after the city Planning Board approved the site plan.
Last month, DHMC opened a new five-story, 240,000-square-foot patient pavilion, totaling $150 million, four years after presenting its conceptual plan to the city Planning Board.
Jay Campion, a Hanover-based developer who has been active in Lebanon, said that it’s difficult to make comparisons between projects, particularly in the case of a large, complex development such as River Park.
The challenge for developers, Campion said, is that “things change over time.”
A project may seem the best use of a property when development began, but over time the conditions that drove the developer’s plan change, such a rental market demand, zoning rules or a municipality’s master plan.
For example, in 2018 Lyme Properties, responding to the housing crisis, sought city approval to move-up construction of a 125-unit apartment building, which was originally scheduled for a later construction phase. The residential building will now be constructed after the completion of 1 River Park.
Campion is no stranger to lengthy, cumbersome projects. In 2018, he and his partners, New Hampshire-based development company XSS Hotels, opened The Hilton Garden Inn and Conference Center, a $12.3-million hotel and banquet room on Route 120.
The project took over 19 years to complete and required a zoning change and an agreement to make public infrastructure improvements.
It took “multiple meetings over multiple months” to get a variance from the city Zoning Board to build a hotel on the Route 120 property, Campion said, “even though there was a hotel across the street.”
The project also was held up for more than three years because the city determined that the existing sewer infrastructure lacked the capacity to serve a 100-room hotel and conference center, according to Campion.
The Hilton project, like River Park, required the developers to make numerous additions to public infrastructure as conditions to their permit, according to Campion, including a traffic signal upgrade and lane improvements at the intersection of Etna Road and Labombard Road.
The conditioned work added $2.5 million in costs to the project, Campion said.
Assistant City Manager David Brooks, who formerly served as the city’s planning director, agreed that River Park’s size and scope makes it far more complicated than smaller projects, in part because it requires extending the utilities and building new infrastructure.
“River Park is unquestionably bigger than most projects, and there have only been a few (of similar size) in Lebanon,” Brooks said. “Because it is so large and it has been extended over a long period, it gets much more complicated.”
One of the other large Lebanon projects is Altaria, a mixed-use development on Route 120. In 2013, the developers planned to build a 120-room hotel, 42,300 square feet of retail space, 336,000 square feet of industrial and office space and up to 154 residential units on a 65-acre lot. The developers completed the 154-unit apartment complex in 2018. The hotel, though completed years earlier, closed after a fire in 2019 and has not reopened, though the city Zoning Board gave approval in 2021 to convert the hotel to short-term rental housing.
“Altaria has had some development, but not as much as envisioned,” Brooks noted.
Chet Clem has said that completing River Park has become a question of “if” rather than “when.”
“If city officials are not going to participate in supporting River Park the way they support projects at the airport or in downtown Lebanon, then I’m going to have to make a decision whether I am going to continue to build beyond what is economically feasible,” Clem said.
Among his frustrations, Clem said, is the seeming lack of awareness by city officials of how their slow and deliberative reviews of applications and their stringent permitting conditions affect a project’s timing and execution.
For example, Clem said, the city staff is threatening to revoke his building permit on the claim that construction has not commenced on 1 River Park. Yet Clem will not invest money to resolve the obstructing pipe unless he is assured he will have permission to build.
“There’s no reason for me to incur that infrastructure and consultant cost if this building is not going to happen,” said Clem.
City staff said they are concerned that so many details of the building plan have changed from what was approved in 2019.
Most of the contracted workers hired four years ago are no longer with the project, and the city does not know who will be overseeing the work, including the electrical, heating and plumbing, Reichert said. The city must be able to ensure that the project’s contractors are properly licensed. And city officials need a project schedule so that staff can schedule inspections.
The current project cost also is unknown to the city, Reichert said, explaining that the original estimate to construct 1 River Park was $12 million but that costs have skyrocketed since then.
Brooks said the city must be thorough to ensure a project is ready to properly commence.
“Once we issue the permit, the horse is out of the barn and we can’t pull it back,” Brooks said about the need for due diligence.
City staff said they want River Park to succeed, as it would provide a significant boost to revitalizing downtown West Lebanon, but they are not willing to give the project special treatment.
“Rules are in place to apply to everybody, and we do our best to apply them universally,” Brooks said.
Clem is currently proposing a partnership to city officials, in which the city works collaboratively with Lyme Properties to complete River Park. Clem’s recommendations include the city assisting Lyme Properties to access public funding sources such as grant programs and creating Tax Increment Financing (TIF) district.
A TIF district is a public financing tool in which the increase in property taxes from a new development in the district are used to pay for the infrastructure improvements that were necessary to enable the private development. In a TIF, the municipality issues a bond to fund the construction of necessary infrastructure and uses the tax revenues generated from the property’s increase in value to repay the bond debt.
Lebanon currently has two TIF districts, Lebanon Airport Tech Park and downtown Lebanon, which encompasses Colburn Park and sections of Bank, Mascoma and Mechanic streets.
Clem said it is difficult for River Park to compete with these districts whose infrastructure are publicly owned and managed, which helps reduce overhead costs to prospective tenants.
City administrators said they are open to the idea, but so far Clem has not submitted a plan for the council to consider.
“We provided him the rules (for creating a TIF) and a couple of different options,” City Manager Shaun Mulholland said. “That ball is squarely in his court now.”
“If he wants the city to partner with him, he needs to submit the proposal for how he wants it to work,” Brooks said. “It’s all going to come down to the details.”
Brooks said the City Council, in addition to approving the TIF district, will need to agree to adopt River Park’s future roads as city-owned. In 2011, the council rejected this proposal from Lyme Properties.
Clem has requested an informal discussion with the council to gauge their support for a TIF. He said he is reluctant to spend the money and time to develop a formal proposal unless he feels certain the council will approve it.
“I’m not going to spend thousands of dollars to be told no,” Clem said. “My hope is that (the council) sees what hasn’t worked. And if I can explain all of this in a way that is understandable, and they see that it aligns with their plans for (West Lebanon), that’s the only way I see to turn a new page right now.”
Patrick Adrian can be reached at firstname.lastname@example.org or 603-727-3216.