PORTSMOUTH — It’s been more than a year since a consultant hired by the city wrote his evaluation of the three redevelopment proposals for the McIntyre Federal Building.

The city paid Barry Abramson $25,000 to evaluate the proposals before the City Council chose a development team the city would partner with.

Abramson concluded in the report “as indicated by recent market experience in downtown Portsmouth, residential and hotel appear to be market-feasible uses and the market pricing assumed by the proposers appear to be generally consistent with market experience, implying relatively limited market risk for these uses.”

Despite that conclusion, the council, whose members often say they have to rely on the experts they hire, voted to choose Redgate/Kane as their development partner.

Redgate/Kane’s plan calls for using the first floor of the existing McIntyre building for retail and the upper floors for office. The rest of the property, by the way of three new buildings, would be a mix of retail, commercial and at that time 63 apartments. They’ve since increased the number of apartments to 77, with just 77 parking space.

The two other development teams, Leggat McCall Properties and Ocean Properties Hotels/Two International Group, proposed turning the federal building into a hotel with varied combinations of apartments, commercial and retail on the rest of the property.

Abramson raised concerns about the Redgate/Kane proposal in his report and a presentation to the City Council Dec. 20, 2017.

Michael Simchik is one of the leaders of Revisitmcintyre.com, a grassroots group that is opposed to the Redgate/Kane plan and calls for a much less dense development. The group's plans call for a public park on the Bow Street side of the property, a permanent home for the post office and more parking.

“Number one, it begs the question why would they choose somebody that their own consultant said had the riskiest plan,” Simchik said Friday. “Did the council really do their due diligence and read that report?”

Simchik said he “agreed with the city’s consultant when Abramson said it was the riskiest option for the city.”

“The type of rent they’re trying to get for office space, I don’t think is achievable,” he said. “I think it’s also extremely risky to try to put in office space without parking. Everyone knows that downtown.”

“I’m not going to say they made the wrong choice, but it does beg the question,” he added.

Mayor Jack Blalock could not be reached for comment Friday.

Assistant Mayor Cliff Lazenby did not vote to pick a developer partner because he works for Ocean Properties Hotels, but he recalls Abramson’s presentation and recently reread the report. He acknowledged issues raised by Abramson were “a concern to me then because he said it was the riskiest proposal.”

“I understood where the council came down on trying to do something that better fit what more people wanted even if it was more of a risk,” Lazenby said Saturday. “But it’s still been a concern and it’s been part of why I’ve tried to scrutinize this, and keep wanting to question whether that’s going to be a viable model.”

If the council keeps moving forward with the Redgate/Kane project he believes it has to work with the developers to try “to mitigate those risks.”

“If there isn’t going to be parking on site for the office building then how do you make that viable?" Lazenby said. "That’s been a piece I’ve been asking about all along. I hope we address some of that in our upcoming public meetings.”

Asked about the council’s decision to choose Redgate/Kane despite Abramson’s concerns, Lazenby said, “They definitely took a leap. They were maybe trying to go for something even though it might be riskier, it still could be achievable.”

“I understand the spirit and sentiment behind it,” he added.

At the same time, Lazenby said, “I do think, to be honest, it would have been interesting to maybe look a little further weighing office space versus hotel usage. That’s one of the things the consultant said was less risky."

Lazenby said in retrospect, “I would have hoped maybe the council could have taken a little harder look at that question to make sure we understood the tradeoff versus the risk. One of the things that came in loud and clear at that time was that people thought there were enough hotels."

He believes the council doesn’t want the project to be “risky financially” and because of that developers must address parking at the McIntyre.

“The High-Hanover can’t be the only basis to solve parking and transportation at the McIntyre,” he said. “I certainly think we need more than that.”

He called for Redgaye/Kane to put together a plan “in writing with all the elements that we can all look at.”

“Don’t just say we’re going to come up with something,” he said.

The city is working to redevelop the 2.1-acre downtown property through the Historic Monument Program, through which it can get the property for free but must retain the federal building.

Abramson concluded “the major market question in the proposals is Redgate/Kane’s proposed redevelopment of the McIntyre building’s upper floors for office.”

He noted the two other development partners, with extensive experience in office development and leasing, feel strongly that the limitations of the building, particularly very limited windows, and the inability to provide on-site parking for office tenants would strongly inhibit leasing and feasibility.”

Abramson noted Redgate/Kane maintains “there is a strong pent-up market” for upscale office space downtown.

Redgate/Kane also contended, Abramson said, “that the availability of public parking nearby at the High-Hanover Garage would satisfy tenants’ parking expectations.”

He added Redgate/Kane’s “market challenge would be compounded” because they want to prelease 50 percent of the space before starting construction.

Those issues do not rule out a successful Redgate/Kane project, Abramson said, but “they do indicate its somewhat speculative nature and the sense that it poses the most risk among the proposals as to its successful implementation.”.

During his December 2017 presentation, Abramson said there is “no consensus of opinion” from Realtors and others he spoke with about whether Redgate/Kane’s plan is workable.

On the plus side, there’s been a trend nationally by some office tenants to move back downtown, “even if there’s a price premium and even if there’s inconvenience.”

Millennials in particular, he said, would be attracted to working downtown because of Portsmouth’s “vibrancy and the amenity-rich (environment).” The ability to walk or take mass transit could also help attract office tenants downtown, he said. “But in Portsmouth, most of your folks, creative, millennial, what have you, most of them are still driving,” Abramson said.

He talked to some Realtors who believe there’s a market for office space downtown, particularly larger spaces that don’t exist. “The ability to provide three 13,000-square-foot floor plates could mean that some tenants that might otherwise be forced” out of the downtown “would have an option,” he said.

But other “very knowledgeable sources” say the lack of on-site parking “is still a real big problem,” Abramson said.

Some of the people he spoke to said office tenants want “four or five (parking) spaces per thousand (square feet) even if they’re downtown,” Abramson said.

He also cautioned in his presentation that if Redgate/Kane can’t lease all the space or have to lease it at a lower rate “that could wipe out” the ground lease and “maybe dip you into an unfeasible situation.”

He added there is a risk in the amount of retail in Redgate/Kane’s proposal. Their initial proposal was 45,000 square feet, but they recently estimated their gross commercial square feet at 36,708, according to city documents.

The retail space, he said, “is a very significant addition to supply and the rents that are being targeted are at the very high end of the current market."

He compared the rents Redgate/Kane is seeking to “rents that you would typically see more in markets like Market Square.”

“As you get away from Market Square in this direction toward McIntyre, rents start to go down,” he said.

He stressed he wasn’t saying Redgate/Kane couldn’t get the rents, but that “there’s certainly a significant risk and you’d have to give them a chance to prelease it to find out if at the end of the day if they’d be able to do that.”

“It does not appear that that risk is the same for the other two proposals relative to the hotel and retail components,” Abramson said.

In addition to the hotel use proposed by Leggat McCall Properties and Ocean Properties Hotels/Two International Group, their proposed retail “both have significantly smaller components” than Redgate/Kane, he said. Plus, they were seeking lower retail rents, he said.

“Relative to the hotels in both components, it would appear that the hotels make sense in this market,” he added.

Abramson acknowledged you could make an argument that there could be an overbuilding of hotels in Portsmouth. But “at least today it would appear that hotel looks like a more solid bet for implementation,” he said.

The question the council faced is “do you go with something that appears to be more likely implementable, as opposed to another that may be implementable, or may not be,” Abramson said.

A hotel use downtown is “seen as an activating force,” he added.

It’s possible Redgate/Kane could get the rents they’re seeking and fill all the office and retail space, Abramson acknowledged.

“On the downside, they come back to you after a year or two and say we just can’t make the numbers work,” he said. “And maybe at that point they or you” decide “maybe a hotel is what’s feasible at McIntyre.”

In terms of projected annual property tax revenue for each project, Leggat McCall Properties, the biggest proposed project, came in at $980,000 while Redgate/Kane’s, the smallest, came in at $570,000.

He noted that hotel and condo uses tend to have higher tax evaluations than apartments.

Redgate/Kane initially proposed building condos, but they are not allowed under the Historic Monument Program.

Leggat McCall Properties proposed an annual ground lease of $450,000, while Redgate/Kane initially proposed a $350,000 ground lease. They have since reduced that to $100,000 but they did eliminate another proposed mixed-use 5½-story building.