Former Reebok site eyed as future home for Tufts Health/HPHC

This story originally appeared in the July 2 print edition of the Citizen.

After nearly three years of marketing efforts and a recent rebranding under the stewardship of real estate investment firm Spear Street Capital, the former Reebok world headquarters off Royall Street in Canton appears to finally be headed for long-term occupancy with the anticipated arrival of Tufts Health Plan/Harvard Pilgrim Health Care.

An aerial view of the former Reebok campus in Canton

The two nonprofit health insurers, who are in the process of finalizing a merger, have reached an agreement with Spear Street to swap Tufts’ current Watertown headquarters for the similarly sized former Reebok campus, now known as The Block. While no terms have been disclosed and the sale has reportedly not been finalized, the plan is for the newly merged organization to occupy the entire 42-acre Canton complex as its new corporate headquarters.

In an email, a Tufts spokesperson confirmed the organization’s plans, noting that they had explored several commercial properties for a potential new home and that The Block had “emerged as a desirable location.”

“The agreement with the owners of The Block provides the exclusive right to further explore the building and begin drawing up plans for the new company,” said the spokesperson.

While there are still a number of questions to be answered, by far the biggest for Canton officials concerns the potential non-profit status of the new combined entity, which could dramatically alter the revenue landscape for one of the town’s most valuable commercial properties.

As it stands, under Spear Street ownership and even with a special tax agreement (STA) in place after last year’s town meeting, the property generated nearly $1.5 million in property taxes in fiscal year 2020, according to tax collection records. However, Tufts/Harvard, depending on how the new entity is classified, could potentially be exempt from taxation altogether under Massachusetts law.

Select Board member and past chair Chris Connolly, in a recent telephone interview, acknowledged the potential fiscal impact to the town if such an entity were to occupy the former Reebok site.

“Our understanding is they are waiting for regulatory approval to become a 501c3 nonprofit organization,” Connolly said. “If that happens, technically they wouldn’t have to pay real estate tax.”

Under such a scenario, Connolly said the town would likely seek to negotiate a payment in lieu of taxes (PILOT) agreement with the organization. Many municipalities have similar agreements in place with nonprofits to help defray the costs of essential municipal services (police, fire, public works, etc.).

While PILOTs are not usually equivalent to tax payments, they do help cities and towns recoup a portion of lost revenues. The city of Watertown, for instance, currently has two PILOT agreements in place with Tufts Health Plan that last year netted the city a combined $911,000. The agreements cover two properties — Tufts’ headquarters on Mount Auburn Street and another property the company purchased on Grove Street. Both agreements are for 20 years and have a 3 percent annual escalator.

According to Earl Smith, chair of the Watertown Board of Assessors, the two properties carried a combined assessment of $81.63 million in FY20, and if they were taxable, they would have netted the city just under $1.84 million — roughly twice the amount of the PILOT payments.

Canton officials, however, cautioned that it’s too early to speculate on potential tax impacts with the sale of the property not even finalized. Town Administrator Charlie Aspinwall noted that the regulatory process involved in obtaining nonprofit status is a complex one and there are “a lot of factors that go into that analysis.”

“The first step is to see the outcome of what that process is,” he said, “then working through the Board of Assessors and figuring out whether it’s a charitable organization or not.”

Gene Manning, chair of the Canton Board of Assessors, said in an email that representatives from his board and the Select Board as well as Aspinwall will be meeting with the leadership of the new combined Tufts Health Plan and Harvard Pilgrim Health Care in July and “expect to have more details on the project and timeline.”

“Once we understand the structure of the new combined company we will discuss their engagement with our community,” Manning said.

If a PILOT agreement were to be deemed appropriate, Manning said the Select Board would be the accepting authority on behalf of the town.

As for the property itself, Tufts/Harvard Pilgrim would be acquiring a 42-acre, sprawling corporate campus featuring 560,000 square feet of office space together with a staggering level of amenities, including a fitness center, track, and a variety of indoor and outdoor meeting spaces.

Spear Street, who purchased the site from Reebok in March 2018 for a combined $88 million, has reimagined the property while undertaking an ambitious capital improvement plan that includes a brand-new dining area and redesigned lobby and patio areas. They also invested heavily in marketing for the property and designed an interactive tour that targeted both single users and multi-tenant configurations.

A previous report by Real Estate Alert noted that the property attracted a range of suitors and that Spear Street had reportedly been in talks to lease the property to several other tenants, including Fidelity Investments, Hasbro Inc. and Transamerica Corp.

Spear Street also previously sold a roughly 20-acre portion of the site to Canton-based Trillium Brewing Company, which has announced plans to relocate to the property and expand its operations. Plans include a new production brewery and taproom as well as a restaurant, outdoor patio, event space and more patron parking.

A representative from Spear Street, reached by telephone, confirmed the basic agreement with Tufts/Harvard Pilgrim as previously reported but declined to discuss any specifics of the deal. An email placed to the owners of Trillium was not returned.

For more information about The Block campus, visit www.theblockboston.com.

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Posted by Jay Turner on Jul 10 2020. Filed under Business. Both comments and pings are currently closed.