What Your City Needs To Be The “Next Somerville”

Photo courtesy of learner.org

by Lenny Pierce, Research Analyst

Somerville’s alternate moniker “Slumerville” likely resonates with fewer Bostonians than ever before. That is because what was once an area known for its meat packing plants, manufacturing facilities and a charming waste transfer station, is now immediately recognized as a hip residential haven for 20- and 30-somethings seeking financial refuge from steep Cambridge rents. But the secret has been out for long enough for rents in Somerville to become dangerously comparable to Cambridge. Luckily for nearby cities, the desire for cheap rent remains strong in the heart of the young professional, meaning any one of them could be the next up-and-coming neighborhood. It would seem that just as 1995 meant the quest for the next Cambridge, 2015 will mean the quest for the next Somerville.

The question on Boston’s mind is not whether or not a new Somerville will happen, but where it will happen. In a call to RadioBoston, Beth Teitell, a features writer for The Boston Globe, and Richard Florida, an urban studies theorist, identified a few key pieces that must be in place in each potential location.

Teitell spoke to the necessity of being near a denser urban center where people want to be—presumably for both work and play purposes. “You have to be near some place that other people want to be,” said Teitell. For a long time, Boston was this denser urban center for Cambridge residents. More recently, Cambridge has been that in varying degrees for Somerville residents. With Somerville’s first tech tenant moving in and already vibrant “play” opportunities through the nightlife of Davis Square, could Somerville itself be the next locale residents simply must be close to?

Since this next hot spot isn’t necessarily going to be a job center itself, residents will need to get in and out easily via public transit. According to Teitell, buses aren’t going to cut it, “Public transportation’s a must. So it has to be either subways, trains and even water taxis are better than buses.” Indeed, the extension of the MBTA Green Line will mean that the somewhat lower rents of Union Square in Somerville itself could soon be a memory.

If young people are going to move there, this new area also needs plenty of rentable space. “To be the next Somerville, they need to have a lot of rental housing as opposed to just single-family home ownership or condo,” Richard Florida said in the interview. Florida is the director of the Martin Prosperity Institute at the University of Toronto and a senior editor of The Atlantic.

So who are the candidates? Adam Nazzaro, co-owner of Watertown’s Farmer’s Market Kitchen, said his neighborhood is on the list. Nazzaro told The Boston Globe that his town is already displaying the Somerville atmosphere, noting that he’s seeing more and more folks walking around with rolled-up yoga mats slung over their shoulders. The access to rentable space strengthens Watertown’s case even further; 800 high-end apartments have already been built or approved. “It could be the next Somerville,” Nazzaro said.

The importance of T access gives Medford a good shot, too. The MBTA Green Line extension will include a stop at College Avenue that is planned to open by 2020. Keller Williams’ Ed Greable told The Globe that bidding wars between buyers in Medford are already occurring, meaning some interested parties may already be thinking about Malden.

Erin Fronrath, a residential broker with Coldwell Banker, told us she thinks Dudley Square in Roxbury belongs in the conversation as well. “While it’s sandwiched between the South End and Jamaica Plain, two neighborhoods with tons of culture, art and commerce and the rents to match,” Fronrath said. “The Roxbury neighborhood offers a lower-priced alternative and the excitement of growth and opportunity.”

Another factor could be the willingness of city officials to invest in their own reinvention. With things like municipal satisfaction surveys, Somerville’s government has shown its eagerness to encourage the city’s evolution. Teitell shared an anecdote of an interaction between Somerville city officials and mobile vendors as an example of this attentiveness. “I talked to somebody who runs a food truck festival and she was describing, when they wanted to go to Somerville, how somebody from City Hall came and drove around with them and said, ‘Where would be a great place for your food trucks?,’” Teitell said. “And she contrasted that with another town where they were going to have a festival where the people weren’t helpful at all.” Some credit this type of positive government attitude as a major factor in the rehabilitation of Somerville. The next city that wants to witness a similar phenomenon may have to adopt this type of mentality towards its public. It could be that the title of “Next Somerville” goes to the city that is most serious about earning it.

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MA Biotech IPOs May Be Stopping at 16

by Lenny Pierce, Research Analyst

The story over the last 20 months in Boston’s biotech industry has been the ever-growing list of companies going public. The most recent member of the club was Proteon Therapeutics, Inc. (NASDAQ: PRTO), which went public on October 22, raising $61 million, offering 6.1 million shares at $10 a piece. That IPO marked the sixteenth this year for Massachusetts biotechs. Despite the excitement, including the Boston Business Journal’s branding of the biotech industry as Boston’s “IPO Machine”, the party may be winding down. A handful of local biotechs who have filed their intent to go public this year are contemplating postponing that move. Some think it may be the less-than-stellar performance of their freshly public peers that is driving that decision.

Kathleen Smith of Renaissance Capital told the BBJ why, in her words, “the window for biotech is quickly coming to an end.” Renaissance is an exchange-traded fund focused on stocks that have recently held IPOs, putting this trend firmly in Smith’s area of expertise. Smith told the BBJ that investors have paid close attention to the stock changes in newly public companies and they don’t like what they see. For recent IPOs in general, the stocks are down 10% and Smith says that the declines are probably greater for biotechs. One local example is Tokai Pharmaceuticals (NASDAQ: TKAI), which saw its shares rise 58% after its IPO on September 17, but has watched the stock hang around or below the initial $15 share price as of late. Tokai is headquartered at One Broadway in Cambridge and develops therapies for the treatment of prostate cancer and other hormonally driven diseases.

Even Proteon had to cut their share price down to make their IPO happen. The 6.1 million shares at $10 each were originally intended to be 4.7 million at $12-14 each. That $10 price tag is 23% below the midpoint of their proposed share price. Proteon is based at 200 West Street in Waltham and is developing a drug that could prevent blood vessels from clotting after surgery in order to prepare patients for dialysis.

The most recent defector from the trend is Rhythm Pharmaceuticals (855 Boylston Street), which just withdrew its plans for an $86 million IPO first filed in late August. This withdrawal had much to do with a deal between them and Activis, which ensured the latter an option to buy Rhythm’s gastrointestinal drug subsidiary. Even so, playing witness to their underperforming contemporaries likely soured the idea of an IPO even further.

Unless companies like Tokai and Proteon start performing better—and fast—the string of biotech IPOs for 2014 could stay right at 16. Previously hopeful companies with tentative plans to go public may have to keep stalling until market conditions change. It appears the “machine” may be decisively shut down for the year.

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