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Sunday, October 9, 2011

Nashua powerless as Pennichuck sells last developable land

NASHUA – As Pennichuck Corp. prepares to sell its last untouched piece of developable land in the city, residents have asked questions that have been posed for decades:

How could Pennichuck have sold most of its property? Why hasn’t the city done something about it?

With the city acquiring Pennichuck partly to save land from development, residents have wondered how much land is left to save.

The answers, offered by city officials, are that Pennichuck has a right to sell land in a free-market economy, and government can’t interfere as long as the company follows the law.

And the other response, which some people don’t like to hear, is that only one developable tract of Nashua land remains in Pennichuck’s hands. But barring a last-minute offer by the city, that property is about to be sold.

Pennichuck is preparing to sell land off Concord Street in a $2.2 million deal with two local developers. The developers have city approval to build an 85-unit elderly housing complex on 33 acres that some argue should be preserved because of its place in the watershed.

City officials, some of whom also object to the deal, respond that, short of buying the property from Pennichuck and paying the developers, the project known as Hayden Green can’t be blocked.

Since 1985, the city has offered mostly the same response to those concerned about Pennichuck-related development. Pennichuck’s real-estate subsidiary, Southwood Corp., has sold as much as 1,000 acres in Nashua and Merrimack that it said could be developed without harming the region’s drinking water.

In many of those land deals, Southwood sold the property to partnerships that included itself and local developers, including John Stabile. Pennichuck officials have said Southwood kept itself as a partner in the deals to ensure that development of watershed lands was environmentally responsible.

Those deals shaped the local landscape in north Nashua. Pennichuck property now features Southwood Corporate Park, the Marriott Hotel and other businesses off Somerset Parkway and Westwood Corporate Park off Amherst Street.

Thousands of Nashua and Merrimack residents put their heads on pillows inside homes on old Pennichuck land: houses and condominiums in developments such as Brinton’s Landing, Harris Preserve and Bowers Pond.

The Concord Street parcel that could soon be home to Hayden Green is the only developable land that Pennichuck didn’t transfer to Southwood.

How did Pennichuck, a water supplier, get into the real-estate business? How hard did the city try to preserve some of this land? And, as the city prepares to buy Pennichuck for $200 million, partly to preserve watershed territory, how much land is left to save?

History

From as early as 1920, Pennichuck acquired watershed land through real-estate deals, bank foreclosures, tax sales and even as gifts from residents. The aim was to protect the environment around Pennichuck Brook and the region’s water supply.

By the 1980s, Pennichuck’s land within the 26-mile Pennichuck Brook watershed amounted to about 2,000 acres, or slightly more than 3 square miles.

Pennichuck commissioned a study by Sasaki Associates, of Watertown, Mass., to review its land holdings. The Sasaki report, completed in 1980, found that Pennichuck didn’t need all of its land to protect the local water supply, and that some 1,500 acres could be developed without environmental harm.

The Public Utilities Commission approved Pennichuck taking the 1,500 acres out of its regulated holdings at the prices it paid for the land and transferring them to Southwood. The transaction cost $34,000.

From the mid-1980s until the early 2000s, Southwood turned around a considerable profit for land it had bought from its parent company for a song. Southwood and its development partners fetched premium prices for the finished properties.

Deals included the Marriott Hotel paying $1.5 million for its land in Southwood Corporate Park, the state buying land off Somerset Parkway for $1.3 million for a Park and Ride facility and Corning Laserton taking a 56-acre Westwood Corporate Park lot for $5 million.

The residential developments proved lucrative, as well. For instance, Southwood received $11,500 each time a house sold in Herron Cove in Merrimack.

For Kathy Nelson, “the red flag” of Pennichuck-related development came when she saw the building of Northwest Boulevard off Amherst Street, just southeast of Continental Boulevard. The area had seemed immune to development, but now, the road signified change, she said.

Nelson, a member of the city’s Conservation Commission for more than a decade starting in 1990, remembers the city going into overdrive to buy the property.

“There was a lot of joint effort by the Conservation Commission, by the city Planning Department, to pursue funding for that,” Nelson said. “It takes a lot of work. We knew it would be a high priority to meet state funding deadlines.

“It took a lot of work, and it was a success.”

The city bought that parcel, known as Northwest Conservation Land, and another lot off Amherst Street for preservation.

But the city couldn’t buy every piece of Pennichuck property, several city officials recalled last week. The city just didn’t have enough money to match the revenue generated through commercial development, they said.

“We wouldn’t have had the money to entertain that,” said Rob Wagner, who was mayor from 1992-95, when the city was recovering from a recession.

Wagner recalls how aldermen tried to sell the Hunt Building on Main Street for $50,000 to Grace Fellowship Church. He vetoed the deal, but it was further proof that a cash-strapped city couldn’t afford to buy property for preservation, he said.

Parcel F

Wagner’s predecessor, Jim Donchess, helped launch a citizen referendum that placed land conservation codes on the books to establish buffers between watershed areas and developments. All projects near the watershed since the codes went into effect, including Hayden Green, have had to pass muster by city planners.

Still, city officials have long expressed a desire to buy Pennichuck so that Nashua could halt land sales and protect the watershed.

“Throughout it all, we have been concerned about where we could get the most bang out of the buck,” Alderman-at-Large Brian McCarthy said.

“We’ve been buying parcels in the $10,000 to $15,000 range,” said McCarthy, who has been on the board since 1994. If the city were to purchase the Hayden Green land, “It would cost 10 times as much as that.”

The city would not only have to compensate Pennichuck, but also developer North Concord Street Properties LLC for the estimated profit from the sale of elderly housing units, he said.

Mayor Donnalee Lozeau has talked to the developers behind the LLC, according to some city officials. She has remained mostly quiet on Hayden Green.

Last month, attorney Brad Westgate, who represents the developers, threatened to sue if any city action leads to the delay or halting of the project.

E-mails surfaced last month that showed Nelson, when chairing the Conservation Commission in 2003, had some preliminary discussion with Pennichuck to buy the Hayden Green land, known on planning charts as Parcel F.

But as soon as hope built about a possible deal, word quickly returned that Pennichuck wouldn’t sell. Nelson relayed in an e-mail that Pennichuck’s CEO at the time, Don Correll, had concerns about negotiating with Nashua because city officials were starting to prepare to acquire the company through eminent domain.

“We didn’t have a willing seller,” Nelson said last week. “Whatever the case, we didn’t have a willing seller.”

McCarthy added: “There wasn’t a huge opportunity to get it. Pennichuck steadfastly refused to negotiate.”

The city could have tried to take Pennichuck watershed land by eminent domain, McCarthy said.

“But I can’t see how we ever could have taken Parcel F,” he said. “There’s not a public test there.”

Bernie Streeter, who was mayor from 2000-08, led the city’s eminent domain acquisition of Pennichuck after the company refused to accept Nashua’s $121 million purchase offer in 2003. After years of battling, the two sides started to look at a deal in 2008, and this year, aldermen approved a binding agreement with Pennichuck.

In an interview last week, Streeter recalled the city’s decision last decade to pursue Pennichuck.

“It was not because city was in the water business,” he said. “It was because the city wanted to further protect land. When I found we were the only city in the state that didn’t control a water company, I had ideas we could sell the water (cheaper) than Pennichuck.

“But the basic reason to act was to protect what watershed property was there. Pennichuck was constantly selling off parcels of property.”

Landlocked

But as Hayden Green nears construction, residents and some city officials have asked how much land is left. Or, more precisely, they question how much undeveloped land that could be developed is left.

It appears Parcel F is the last such lot.

A 2002 review of Pennichuck, prepared for the city by Rizzo Associates, listed an alphabet soup of parcels that were either sold, undevelopable or landlocked. Only six parcels had potential.

Five were in Merrimack, with three of them targeted by the state for a circumferential highway.

In Nashua, the one remaining area that could have been developed and was still in Pennichuck possession was Parcel F, behind the Clovelly Apartments on Concord Street.

In July, Roland Olivier, who is the lead attorney for Pennichuck and CEO of Southwood, discussed Parcel F with aldermen.

“We bent over backwards like many other sellers in the state to make sure that we could preserve our right with the developer to sell that land,” Olivier said, according to meeting minutes.

“Why? Because from the business perspective, it made a great deal of sense. Now, you can argue whether it made sense from a conservation standpoint. I recognize that there is an argument to be made on the other side, but from a business standpoint, there is no way you could have gotten this price in today’s market for this property, and it was the highest and best use for that property.”

Olivier added that since the Hayden Green development will be south of the watershed, and tests showed the complex’s runoff water would flow away from the watershed, there will be “no impact whatsoever on the water supply. Otherwise, we would not have developed that land.”

Albert McKeon can be reached at 594-5832 or amckeon@nashuatelegraph.com. Also, follow McKeon on Twitter (@Telegraph_AMcK).