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John Harvard's Journal

In Watertown, a New Frontier?

5.1.01

The geographic center of the University's ambitions for campus growth over the next several decades lies to the south of Harvard Square, in the 100 acres of land purchased so far in Allston, beyond the Business School. But actually building academic facilities there will be a very protracted process (see "The Politics of Campus Planning," March-April, page 56). In the immediate future, it appears, Harvard's expanding programs and departments may be accommodated to the west --on the Cambridge side of the Charles, upstream rather than across the river, in the renovated Watertown Arsenal.

Watertown Arsenal, on the Charles River, offers campus-like office and lab space.
Watertown Arsenal, on the Charles River, offers campus-like office and lab space.
Courtesy O'Neill Properties

As this issue went to press, Harvard was negotiating with O'Neill Properties, the Philadelphia-based developer of the 30-acre site--which encompasses 753,000 square feet in several buildings--to acquire it for a price reported to be $150 million to $185 million.

"All the University departments are very squeezed for space, and Allston has always been a very long-term campus," said Sally H. Zeckhauser, vice president for administration, explaining Harvard's interest in the prospective purchase. Of the arsenal complex, she said, "It's up, as opposed to a lot of the other buildings we think about" to accommodate growth. For example, the new center for government and international studies in Cambridge is now grinding along in its fourth year of plans, design, and permitting, with occupancy unlikely before the end of 2004. Moreover, Zeckhauser said, the Watertown property has campus amenities--a child-care facility, green space, a parking garage, and a restaurant and theater on site--unavailable in the few offices offered for rent in buildings scattered around elsewhere in Cambridge and its environs. Moreover, rental costs in the arsenal complex are lower than those near Harvard Square, a boon for Harvard units that would rent space from the University there. And, perhaps crucially, the Watertown space is "permitted for office or laboratory use."

The University was familiar with the space before it was offered for sale: Harvard Business School Publishing is a major tenant, renting 112,000 square feet in one building. It was a clause in that lease, which gave Harvard the right of first refusal, that triggered the University's interest when O'Neill began marketing the property by auction last winter.

The arsenal complex is already home to Harvard Business School Publishing, the tenant of the building at the upper left. The long building in the upper center houses some of the operations of Arthur D. Little Inc., the consulting firm. A mix of commercial tenants fills the other structures, which include a central parking garage and support services and amenities not found in stand-alone Cambridge office buildings.

The arsenal complex is already home to Harvard Business School Publishing, the tenant of the building at the upper left. The long building in the upper center houses some of the operations of Arthur D. Little Inc., the consulting firm. A mix of commercial tenants fills the other structures, which include a central parking garage and support services and amenities not found in stand-alone Cambridge office buildings.

Courtesy O'Neill Properties

The prospect of a sale to a tax-exempt institution like Harvard dismayed Watertown officials. Acting through the Watertown Arsenal Development Corporation, the town funded the initial purchase of the site from the U.S. Army in the mid 1980s, selected the developer, and oversaw the redevelopment, gaining an enhanced waterfront and a critically important infusion of tax revenues.

In a delicately phrased letter to town manager Michael Driscoll dated February 26, Harvard's vice president for government, community, and public affairs Paul S. Grogan acknowledged that "it would indeed be unfortunate for Watertown to have Harvard University, or any tax-exempt buyer, purchase the property and immediately seek to remove it from the tax rolls, however lawful that might be." Grogan noted that 80-plus percent of the arsenal space is rented to commercial tenants, and would remain taxable during the life of those leases. Harvard offered to "refrain from claiming exemption" for any of the space it used for tax-exempt purposes before February 2003. Finally, he suggested negotiating a "revenue protection agreement" governing the property for the longer term, and observed that Harvard might be a more stable, value-enhancing owner than commercial tenants, such as the current roster of consulting and Internet enterprises. Driscoll was quoted as responding that "long term isn't [just] until fiscal year 2003."

Should Harvard's bid succeed, the purchase will likely be funded by a bond offering, with the debt service covered by rents. Zeckhauser said she could envision several uses for the space as leases expire and tenants go elsewhere or are moved around. In the near term, accommodating academic users who have spilled out of their current facilities would be the highest priority. But in the future, as an Allston campus begins to take shape, she said the arsenal space could play another role. Then, it might enable the University to provide options for commercial and office tenants in Allston whose operations had to relocate to make way for the emerging academic precinct south of the Charles River.