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A work in progress

 Environmental remediation and asbestos abatement are under way at the Midtown Plaza site as the city of Rochester continues to negotiate terms with proposed tenant Paetec Holding Corp. and weigh three proposals for renovating Midtown Tower. 

It has been nearly two years since then-Gov. Elliot Spitzer came to Midtown on Oct. 16, 2007, to announce a state-backed plan to clear the site, allowing Paetec to move its offices from Perinton to a new downtown headquarters tower. Since then, state and local officials have been working with Paetec on financial arrangements. 

"What we’re doing right now, now that we have a project that seems credible, is working our way through the process of coming up with a financing package that (Paetec) can afford and makes sense from the city’s point of view," city Corporation Counsel Thomas Richards said this week. 

"There’s no question that it’s taken longer than we thought, but it’s taken longer because that’s the environment people are dealing in today," he added. "We’re still OK. The project would not have had any real serious work being done by Paetec on the site until probably 2011 anyway, maybe at the end of 2010. But it’s not tomorrow."

The negotiations involve representatives of Paetec, the city and the state. 

"Some of the programs for which people who build on this site would be eligible, no matter who they are, are state programs," Richards said. "For instance, it’s an Empire Zone. And there are other state programs that assist in construction." 

The city does some of the certification work for Empire Zone eligibility, including applications to the state, Richards said. 

"We’re working our way through that," he said. "That’s an example of why the three of us need to do it together. 

"What we’re trying to do here is not get into a situation where we go through all this work, we make an application to the state and the state turns us down," he continued. "We’re trying to get everybody working together on this so that whatever we come up with has a very good chance of success, rather than go through the process and then find out we’re in left field." 

Paetec chairman and CEO Arunas Chesonis declined to comment on the status of the negotiations and other aspects of the possible move. In an interview with the Rochester Business Journal in July 2008, he predicted that an agreement was perhaps nine months away. 

He previously has said that Paetec will not move downtown if costs are greater than for moving to a suburban location and if promises of state and local incentives are not fulfilled. He also has said that a move to Midtown is contingent on other developments at the 8.5-acre location.

"I’m not going to commit the company to anything before I see something going on at the site," Chesonis told the Rochester Business Journal last summer. "You can (phrase agreements to specify) that if such and such happens, then we’ll move forward. 

"We’re not going to guarantee that Paetec would do something without (assurances that the development) would be happening in an appropriate way. We want a certain look and feel to the end product." 

Two additional entities have contacted the city about locating on other parts of the site, said Richards, who would not name the interested parties.

"There is nothing formal," he said. "We’re in the chicken-and-egg stage of this whole thing. Once we firm up Paetec, there are people who are interested in doing things around Paetec. The same thing is true of the tower. 

"In a lot of ways, it’s the story of downtown, isn’t it? You’ve got to have a first mover. Yeah, there’s been interest. People have expressed interest in doing things that are consistent with that original plan we put out. But they’re going to wait and see, as are we, what we can pull together." 

In November, project administrators unveiled renderings illustrating what the site might look like, subject to long-term alterations. Paetec would be located on one of seven distinct blocks. 

The renderings came one month after Paetec announced that it was reducing its proposed construction to a 350,000-square-foot building of nine or 10 stories rather than a 500,000-square-foot building of at least 15 stories. 

"Paetec has gone through a process that allowed them to downsize their aspirations," Richards said. "That’s made it more probable that we can put together something here that can be financed. 

"Similar to that is the ordinary learning process you go through with matching up your aspirations to your capacity," he added. "Some of that is influenced by the fact that we’re in a time where it’s very hard to finance commercial real estate. That’s going to be true if you’re Paetec or Google. That’s slowed down the process by which we put it together." 

The first signs of physical change at the now-vacant Midtown Plaza have become evident in recent days. Two holes have been punched in the Broad Street side of the complex, and a pile of debris sits outside the wall. Similar work is under way on the side of the complex facing Atlas Street. 

Remediation and abatement procedures are expected to take 14 months, with demolition scheduled to begin early in 2010 and continue for 18 months.

A request earlier this year for proposals to rehab Midtown Tower drew two responses, from local developers Patrick Dutton and Shane Bartholf and from downstate developer Harmony Group. Alexander Street architectural firm Chaintreuil, Jensen & Stark LLP provided designs for both proposals.

The two developers were joined by Christa Development Corp. after the city issued an amended request for proposals.

"We are in the review process," Richards said of the tower portion of the project. "We’ve gone back to them and asked for more information, and there are a series of meetings scheduled with them. It’s still our intention to make a decision, probably by September. 

"Nothing will happen right away, but as we prepare the contracts for demolition, those contracts will go out for bid sometime in the late fall, like October or November. Obviously, a decision about the fate of the tower needs to be made in order to incorporate that into those contracts."

The original proposals called for mixed-use development, including commercial or business use on the first three floors of the 17-story tower and residential units on upper floors. 

The Christa proposal also calls for housing, though chief operating officer Brian McKinnon declined to provide details. 

Paetec, however, remains the linchpin in developing the Midtown site. Speaking at the company’s annual meeting in June, Chesonis said Paetec would not burden itself or its shareholders with extra costs.

"If (the state) can make our shareholders happy, then we’ll (build at Midtown)," Chesonis said at the time. "If we end up not going downtown, the city would still have an eight-acre site shovel-ready for other development."

As negotiations drag on, skepticism and concern mount as to the viability of full-scale redevelopment at the site.

"Some people have expressed some reservations about that and what (Paetec) would do, but if they wanted to walk away from this they could’ve walked away a long time ago," Richards said. "The fact of the matter is, they’ve hung in there and want to try to figure out a way to make this happen, including a substantial investment on their own.

"We’ve been meeting with them regularly and we’re working to do that, and they’ve stuck with it. It’s to their credit that they’ve done that."

rbj@rbj.net / 585-546-8303

08/28/09 (C) Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303. 


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