Puerto Rico is moving ahead with a long-time initiative to revamp 100 acres of waterfront property between historic Old San Juan and the center of the city.
The development site is located just east of Old San Juan on 21 city blocks along the San Juan Bay in Puerta De Tierra. For more than 15 years the government has sought to improve and rehabilitate the waterfront area, which now contains commercial and residential property, light industrial maritime facilities, and several unused piers.
It is one piece of Gov. Luis Fortuño’s Golden Triangle project, a large-scale, mixed-use urban redevelopment plan that includes Old San Juan and the Convention Center District.
Government officials last month selected Forest City Washington, a subsidiary of Forest City Enterprises Inc., as project manager of the waterfront development. The company will manage the development process.
The commonwealth and Forest City on Friday signed off on a one-year renewable contract in which Puerto Rico will pay the company no more than $4.7 million for its consulting services on the waterfront development. Officials are now working on a schedule to map out when the firm will unveil an updated design plan and other project deadlines.
Forest City is not the developer and does not have equity in the area. The commonwealth currently owns the land and it could play a part in financing the project by issuing bonds or investing through the Government Development Bank for Puerto Rico. The administration, however, is keen on using private investment to help facilitate development on the island.
Forest City’s first job will be to analyze the current redevelopment design plan that was crafted under prior administrations and determine what aspects should stay and what details should change to better reflect current market conditions and the goals of the Fortuño administration.
The current design plan includes 3.8 million square feet of residential, business, hotel, and civic space, along with 96 marina slips and 31 acres of public parks and open space. In addition, there would be more than two million square feet of parking, according to the request for qualifications for project manager. Roughly two miles of waterfront will allow for promenades, parks, and bike paths.
Secretary Jose Perez-Riera, head of the Department of Economic Development and Commerce, the government agency in charge of the waterfront development and the Golden Triangle project, said that officials are prepared to alter the current design if necessary. In particular, the amount of housing units in the plan may have to decrease.
“To the extent that we can keep the bulk of the designs and the ideas that are in place, we’re going to do that,” Perez-Riera said. “If we have to tinker with the plan somewhat, we may do so just to make sure that we make it viable. For example, the breakdown of residential to commercial to business ... we have a surplus of residential right now, so it may be that those numbers need to be toned down somewhat. But that’s the analysis that is going to be undertaken now by this department along with the [Puerto Rico Tourism Co.] and Forest City.”
Prior administration cost estimates of the waterfront redevelopment — which the DEDC said will certainly change — peg the project’s build-out costs at $1.5 billion. Of that amount, approximately $300 million would come from the commonwealth to pay for public infrastructure improvements while private investment would cover the additional costs, although officials are still evaluating that breakdown.
Forest City and Perez-Riera’s team will also construct a financing plan for the redevelopment. Officials stressed that it is too early to say how the project will be financed. Perez-Riera said bonds, possibly backed by tax increments, could be used. Tax increment financing has not been used before in Puerto Rico and the government would need to gain legislative approval for such borrowing.
“We’re basically looking at all options,” the secretary said. “You could finance part of this project through a bond issuance, you could finance this project through some incremental taxes or you could do tax increment financing. There’s a series of different options to take a look at and those are the conversations that we’re having with [Forest City] and internally here in my department as well as other agencies of government. They’re going to have a role and say in terms of what happens.”
One such agency is the GDB, Puerto Rico’s fiscal adviser. The bank’s president, Carlos Garcia, said that officials are still working on how best to redevelop the site, with exact financing plans to follow those decisions.
“It’s too early to tell and it depends on different factors,” he said. “The Golden Triangle is the redevelopment of the three corners of the tourism peninsula ... and there’s several alternatives there. It could be infrastructure needed in some of the areas, or it could be specific projects. Other than what Secretary Perez-Riera has said, I would say that discussing any type of financing before announcing exactly what’s going to be the concrete project that you want to do would be premature at this point.”
The development is also awaiting permits from the U.S. Army Corps of Engineers, the island’s Environmental Quality Board, and Puerto Rico’s Planning Board, which reviews the commonwealth’s long-term economic goals, according to the RFQ.
The ultimate goal of the Golden Triangle is to utilize Old San Juan, the waterfront, and the Convention Center District as an area to attract additional tourism, commercial activity, and business travel to the city while at the same time providing new housing and business options for residents.
Fortuño stressed the project’s importance during his state of the commonwealth speech and budget address on April 29, and described the Golden Triangle as “one of the economic development initiatives with the greatest potential for job creation, right here in the metropolitan area.”
“In fact, tourism is one of the most important service sectors in the world economy, and in this administration it will be a key part of our economic development,” the governor said in his speech. “We are going to make Puerto Rico a first-class destination at the global level, and the leading tourism destination of the Caribbean.”
Forest City has redeveloped other urban waterfront projects. In the District of Columbia, it is working on transforming a former Navy Yard into 5.5 million square feet of residential, office, and recreational use. The 42-acre project will include a marina and is in walking distance to Capital Hill. In Pittsburgh, the firm redeveloped 1.2 miles of riverfront property called Station Square, which reopened in 2002. The area includes historic sites as well as shopping, entertainment, dining, and hotel development.
Charles A. Ratner, Forest City president and chief executive officer, said the company is looking forward to transforming the San Juan waterfront project.
“This is precisely the type of project — including elements of urban infill, revitalization and waterfront redevelopment — that Forest City has experience with and does well,” Ratner said in a news release. “This selection also reflects our continued strategic expansion into asset management and third-party advisory services.”