Build up | Kevin Mattson's back to dreaming up development deals after a crashing market deals a blow
Photo/Joe Phelan
Kevin Mattson's efforts to help get the Legislature to pass historic preservation tax credits in 2008 are paying dividends on projects such as his renovations of the Worcester House in Hallowell
Kevin Mattson’s business was soaring at the outset of 2008. His once-fledgling firm based in Augusta, begun as Harper’s Development and now called Mattson Development, was among Maine’s top commercial real estate firms, and offers were pouring in.
“I had three guys full time just analyzing deals,” Mattson says. “We were getting calls from as far away as Wyoming. There were 10 times as many offers on the table as we could possibly do.” He pauses a moment to reflect. “It was crazy,” he says.
Then came the crash. Between the Bear Stearns liquidity crisis of March and the collapse of Lehman Brothers in September, “the market completely dried up,” Mattson says. “There was no credit, no deals.”
At the height of the boom, Mattson Development had 30 employees. Now it has five, plus several former employees on contract. Mattson had to make drastic changes. He put his house on the market. He cut up his credit cards. He considered closing up shop. “We survived, in the end, because we had good tenants,” he says. “All our buildings were fully rented. If we’d just been selling lots, we’d be gone. We went from being a development company to a management company, just like that.”
Not that it was an easy transition. Severin Beliveau, senior partner in law firm Preti Flaherty and one of the state’s best-known lawyer-lobbyists, has been a financial partner with Mattson for more than 10 years. “A lot of people would have given up,” Beliveau says. “Kevin was engaged in intense negotiations with banks, investors, creditors, tenants every day for a year. He was tenacious.”
A fresh approach
Also critical to Mattson Development’s survival was turning to less traditional means of completing projects. Mattson had to shut down work on one building that had already been started, a 51,000-square-foot structure on the grounds of the Maine Commerce Center in North Augusta, a former computer plant Mattson Development had renovated five years earlier.
But he was able to continue with an overhaul of the Worcester House in Hallowell, his hometown, which was built as a four-star hotel in the early 19th century, when Hallowell was competing with Augusta to be the state capital.
The hotel never prospered, and it eventually became an apartment house. By the time Mattson re-acquired it in 2007 — he had bought it in a foreclosure auction, then sold it — it was in bad shape, with numerous code violations. The structure is now on the National Register of Historic Buildings.
The Worcester House, with a contemporary addition for conference room space, today houses 74 employees of the Maine Public Utilities Commission and Efficiency Maine. Two things helped make the $8 million project viable. Reopened this spring, it gained points for being close to the State House. And historic preservation tax credits approved by the Legislature in 2008 compensated for the much-higher costs of redeveloping a 19th-century building, Mattson says.
On a tour of the building, Mattson points out the old servants’ quarters on the fourth floor — “There was one bathroom and 17 servants” — which feature dramatic views of the Kennebec River.
He also describes the building’s many “green” features, including fluorescent fixtures that automatically adjust to the level of daylight and turn off when the office isn’t being used. “Half the energy costs in a commercial building are from lights,” he says. “The savings from this are huge.” Not surprisingly, Efficiency Maine decided to use its new headquarters as a demonstration project.
While he shows off the renovated building, Mattson also keeps checking the details. “We’ll need to put a coat of urethane on this post,” he tells the building manager, noting the possibility of splinters. In a passageway between sections of the old building, he tests the floor and says, “This squeaks too much. It’ll have to be tightened up.”
Back on track
Mattson grew up with this kind of hands-on approach. His father, Charles Mattson, was a farmer from New Sweden who traveled south in the late 1950s in search of work, eventually becoming a carpenter and settling in the Augusta area.
The elder Mattson founded the C.B. Mattson company, which built numerous federally subsidized housing projects. The firm, now run by Kevin’s older brother, Todd, still manages many of the same projects.
Since the crash of 2008, Mattson says he enjoys the slower pace, if not the struggles he endured over the last 18 months. It’s a period during which he also became a father; his son is now 2 years old. He seems more relaxed, while retaining an omnivorous curiosity about everything from politics to organic agriculture. He has kept his zest for positive thinking. “You have to be an optimist to be in this business,” he says. “It’s all about people’s dreams, and trying to make them happen.”
Lock Kiermaier, a longtime analyst for the Legislature’s Office of Fiscal and Program Review, went to work part time for Mattson Development in 2007. Kiermaier represented Mattson Development as part of a coalition that advocated for the historic preservation tax credits, a bill that established a statewide building code including standards for historic buildings and a $5 million bond issue that provides incentives for downtown development. The bond is part of a larger, economic development package that will be on the June ballot. In terms of boosting redevelopment, it might have been the most successful legislative session ever.
Very slowly, Mattson Development is getting back into the development business.
Moving forward
At the $100 million Saco mill project known as Island Point, Mattson Development renovated a relatively modest commercial building that is now fully leased, but stalled on plans to revive some of the giant former textile mill buildings, some of which have been vacant for decades.
Mattson says it’s not feasible to work on just part of the mill buildings, some of which top 250,000 square feet. The original scheme was for condominiums, “but there’s no market for them at the moment.” His current idea is to cluster subsidized affordable housing apartments around retail and office uses.
Elsewhere, there are glimmers of revival. At a Sanford mill complex that housed electronics manufacturer Vishay Sprague until it closed a decade ago, Mattson has sold its first lease since acquiring the property. Tractor Supply is building a new retail store on an unoccupied corner of the site this spring.
When there were no bidders during an auction in 2002, Mattson offered to take the complex for $1. “It’s a good thing we only paid $200,000 for it,” he says of his ultimately successful offer. The land value must be weighed against the costs of demolishing the buildings, which are not suitable for reuse.
The reason why the commercial real estate market is still flat, in Mattson’s estimation, is that big national banks aren’t doing much new business. “They’re showing profits, but they’re not making loans,” he says. He believes there is still a hangover from the real estate implosion that continues to drag on the economy.
Mattson’s ability to strike deals with banks when many initially didn’t seem interested came from knowing their industry, according to Severin Beliveau. “He’s able to think like a banker. He understands financial documents and balance sheets. He knows their numbers and needs as well as they do.”
Fortunately, some Maine banks are taking a different approach, Mattson says. Kennebec Savings was the primary lender for the Worcester House conversion, “and without them it wouldn’t have happened,” he says. “They were willing to work with us when a lot of other people said no.”
Even the abandoned Commerce Center building in North Augusta has been revived. Mattson Development has signed a lease for the 51,000-square-foot, $8 million building with MaineGeneral Health. Bangor Savings is issuing the construction loan.
Despite his quip about running a management company, Mattson is clearly happier doing development. He says his advantage over other development companies doing renovations is his knack for figuring out costs, the result of years spent working in construction.
He continues to think big, to envision so many projects that he’s likely to build at least some of them. “I’d like to have a crack at the Top of the Old Port,” off Congress Street in Portland, he says of the notorious graveyard for development plans.
“The real limit to what we can do in Maine stems from the lack of capital,” he says. “We’re always in the position of importing capital rather than being able to generate it within the state.”One way to overcome that obstacle, he says, would be for Maine‘s development firms to cooperate. “Maybe we could all get together and build something a lot bigger. The number of landmark buildings in this state is very small,” he says. “We maybe build one or two at the height of each real estate boom. Then, nothing.”
Ten years ago, Mattson renovated his first building — a four-story pre-Civil War structure in Winthrop that had stood vacant for years. Within a few years, he was taking on projects with more than 300,000 square feet of space. With that track record, his latest dream might not seem so outlandish.
Mattson Development
10 Middle Road, Augusta
Founded: 2007, as the development arm of Harper’s Development
President: Kevin Mattson Value of holdings: More than $200 million
Services: Commercial and residential real estate development
Employees: Five
Contact: 622-8712
www.mattsondevelopment.com
Douglas Rooks, a writer based in West Gardiner, can be reached at editorial@mainebiz.biz.
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