Study: ‘Substantial subsidy’ probably needed for proposed Providence high-rise

Jason Fane had said his 40-story tower would need only $18.5 million in public subsidies.

PROVIDENCE, R.I. — The public commission expecting to vote Tuesday evening on New York developer Jason Fane’s latest proposal to build a single high-rise tower on former highway land released documents Friday showing that its independent researcher calculates the project may need a “substantial subsidy” to achieve market-rate returns.

The analysis conducted for the I-195 Redevelopment District Commission questions Fane’s assumptions that a 40-story tower would need only $18.5 million in public subsidies and would generate a 6.99-percent “return on cost,” defined as the net operating income divided by project cost.

Instead, the consultants for the 195 commission project that the tower would have a financing gap somewhere between $32.5 million and $44.8 million, if the high-rise tower were to achieve market-rate returns. The report by Real Estate Solutions Group, of Princeton, N.J., estimates the project would generate only 4.71 percent return on cost — and notes that market-rate returns range from 6.2 percent to more than 8 percent.

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