Revitalization on The Merrimack - Mill Complex Stages Comeback

Building a real estate portfolio out of the remnants of Massachusetts’ industrial past wasn’t Sal Lupoli’s original strategy. He was simply looking for a commissary to produce tomato sauce, mozzarella and dough to supply his Sal’s Pizza chain.

The search led to him to the husk of a massive mill complex on the Merrimack River. “You knew you were in Lawrence when you went past the building with no roof on it on 495,” Lupoli recalled.

Although he ended up locating the corporate kitchen a few miles north in Salem, N.H., Lupoli saw untapped potential in Lawrence, the Bay State’s poorest city. Since 2004, Lupoli has spent nearly $240 million acquiring and renovating the 40-acre mill complex now called Riverwalk, gradually filling it with hundreds of tenants employing an estimated 4,500 people. About 70 percent of his investment has been in upgrades to the crumbling buildings, now filled with offices, medical clinics and manufacturers.

In early March, Lupoli acquired the 203-unit Monarch Lofts apartment complex from developer Robert Ansin for $38 million. The transaction gives him control of the entire 3.6-million-square-foot complex from Route 495 to the historic Duck Bridge on Union Street, and a chance to promote Riverwalk’s “live-work-play” atmosphere, favored in current development projects. He’s in the early stages of permitting for up to 300 additional loft apartments in adjacent unfinished spaces.

Public Investment Benefited Redevelopment

The resurrection of Riverwalk – and its potential to improve Lawrence’s economic fortunes – is a combination of good timing and public-private investment. Lupoli acquired the first phase of the complex in 2004, a year before the Sen. Patricia McGovern Transportation Center opened across the street. The five-story complex has nearly 900 parking spaces serving a relocated commuter rail stop on the MBTA’s Haverhill commuter rail line. The proximity to Route 495 – with an off-ramp next to the property – was already a given.

“The clincher was when I saw the drawings for the parking garage,” Lupoli said. “I said, ‘This is going to be the game-changer.”

As one of Massachusetts’ 26 Gateway Cities – former manufacturing centers whose economies have struggled in recent decades – Lawrence qualifies for government incentives designed to encourage private investment in real estate. Lupoli used historic tax credits and New Market Tax Credits to offset some of the renovation costs. In October, the state’s MassWorks program gave Lawrence a $3.9 million grant for streetscape improvements to the Merrimack Street area.

Local officials were less supportive, Lupoli said. The former mayor, William Lantigua, wouldn’t return his calls. Lantigua lost his re-election bid in 2013 after a scandal-plagued term in which he was investigated for corruption by state and federal authorities. His successor, Daniel Rivera, has been supportive and encouraging, Lupoli said.

Shortly after the first acquisition, Lupoli began renting out space to small users at for as low as $3.25 a square foot. The recruitment focused on state agencies, educational institutions, medical companies, energy companies and startups. He opened a new sit down restaurant concept, Salvatore’s, in 2005 to provide an amenity for tenants.

“I didn’t go after the big tenant,” he said. “When the big tenant leaves, it knocks you out of the box. We had a very deliberate strategy. I sat down with my brothers (and business partners Michael and Nick) and we said, ‘How do you eat an elephant?” he said. “You eat it one bite at a time.”

Phase 1 is more than 95 percent leased, with rents ranging from the high teens to low $30s based upon build-out packages, Lupoli said.

Half of a 1-million-square-foot mill building was demolished to create a better flow through the complex’s interior courtyard used for parking. Dialysis equipment manufacturer Next-Stage Medical, at 150,000 square feet, is the largest tenant. The rest of the complex is populated by a wide range of users including child care centers, social service agencies, a boxing gym and a handful of startups.

Inexpensive flex space with room for expansion made Riverwalk an option for Solectria Corp., a manufacturer of photovoltaic system components, after it outgrew its previous space in Wilmington. When Solectria leased 3,800 square feet in 2005, Riverwalk had just a few industrial tenants, Solectria CEO Anita Worden said.

“It was not a pretty place, but it had the aesthetic appeal in terms of the brick-faced buildings, great windows, a beautiful infrastructure and it was very different than your normal industrial building,” she said.

Solectria now occupies nearly 90,000 square feet, assembling refrigerator-sized control panels on two lower floors with loading dock access, with offices on two upper levels. The complex’s mix of office and service businesses is a convenience for employees, Worden said, many of whom use the dentists’ and doctors’ offices at Riverwalk.

“It’s an interesting concept in that respect,” she said. “We take full advantage of it.”

Next Steps: Andover, Lowell

A Northeastern graduate and East Boston native who sold his car to open his first pizza shop in 1990, Lupoli now is marketing Sal’s Pizza franchises from Silicon Valley to Mumbai. He credits Boston Fan Pier developer Joseph Fallon with helping him land a spot in the Seaport District for Salvatore’s restaurant, joining one of the city’s destination dining scenes. But he’s continuing to focus on Merrimack Valley, where his ventures have a bigger impact on the local economy.

Lupoli is preparing redevelopment plans for another transit-friendly property in Lowell, the Thorndike Mill complex that he purchased in 2013. He envisions a combination of office space, up to 150 market-rate apartments, retail shops and a restaurant in the 146,000-square-foot complex next to the MBTA commuter rail station and a regional bus terminal.

Lupoli Cos. breaks ground this spring on a 40,000-square-foot addition to Andover Medical Center, a 30,000-square-foot complex it built last year for Lawrence Medical Center, Pentucket Medical Assoc. and Andover OB/GYN. And he’s currently working on additional acquisitions in Andover and Haverhill. 

“Lawrence had plenty of opportunity, and I’m in favor of anything that spurs economic development and creates jobs,” he said.

By Steve Adams  •  March 30, 2015  •  Banker & Tradesman  •  Original Article