[ARCHIVED] Harbor Garage Redevelopment | 70 East India Row | Waterfront | Downtown

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Chiofaro was seeking a 15.8 percent return for the total project. His required return, amounting to $118 million, for the total project was about 11 percent. The hoped-for return was probably about $170 million.

Chiofaro's estimate of land and parking cost = $290 million

The total $290 million was allocated as follows:
> $58 million was added to condo cost
> $161 million was added to office cost
> $55 million was added to hotel cost
> $16.5 million was added to retail cost.

The BRA financial analysis cut building size by 25 percent to 900,000 sq ft, and gave Chiofaro a return of 10.9 percent. For most use categories, the BRA return was largely close to Chiofaro's required return percentage: e.g., Chiofaro said he needed a required return of 10.3 percent for the office component, the BRA's financial analysis gave him 10.1 percent. However, Chiofaro's projected (I get rich) return (above the required return) for the office component was 14.7 percent.

The office component was half the Chiofaro-projected building cost, (not including land and parking).
 
stellarfun said:
Chiofaro was seeking a 15.8 percent return for the total project.
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That's really not that bad considering the amount of RISK & time involved for these buildings.

Does anybody know what the returns on these projects are?
Fan Pier (60Million in Tax breaks)
157 Berkeley St (40+Tax breaks)
Millennium Tower (15Million in Tax Breaks)
(Selling one Top floor for 60Million alone?)

What are the ROI on these projects including the taxbreaks.
 
TheRifleman said:
That's really not that bad considering the amount of RISK & time involved for these buildings.

Does anybody know what the returns on these projects are?
Fan Pier (60Million in Tax breaks)
157 Berkeley St (40+Tax breaks)
Millennium Tower (15Million in Tax Breaks)
(Selling one Top floor for 60Million alone?)

What are the ROI on these projects including the taxbreaks.
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The construction cost of the Millennium Tower was 375 million, with estimated total development costs of 700 million. Condos in the tower are currently 95% sold with over 900 million in sales. Adding in the retail space at the base and the remaining 5% of condos I will estimate that the Millennium tower generated one billion dollars in return for the company. With costs being 700 million that means that Millennium partners earned roughly a 43% return on their investment. I don't think they needed a tax break but we also have to remember that these projects can be risky because of cost overruns or economic downturns. If this project finished in 2008 i'm sure returns would be alot lower :D.

Sources:
http://www.citylifeboston.com/luxury_buildings/millennium-towers-boston
http://www.bizjournals.com/boston/r...p-of-the-hub-check-out-millennium-towers.html
 
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So Stellarfun should we really be worried about this developer's measly 15.8% profit burying this garage off the Greenway?

It makes no sense at this point. As an Investor I wouldn't even knock that garage down for such a low ROI. I would at least be looking for 20% return on something this massive.

I would love to know Fallon ROI on Fan Pier projects. We practically paid for the infrastructure costs.
 
Chiofaro overpaying for the garage/land in the first place is a sunk cost. Excluding the cost of the land I wonder what the ROI would be for this project.
 
Let me clarify and expand some of the numbers.

Chiofaro's proposal was for 1,290,000 gsf (BRA analysis cut that to 900,000 gsf, or 69 percent, another alternative cut it to 75 percent of the original gsf)

By component, Chiofaro's cost and required return total:

Condos $257 million (building cost + land and parking + required return. I assume building cost is construction cost and soft cost (A/E etc))
Office $590 million
Hotel $243 million
Retail $63 million

The report (with the numbers) to the BRA by the financial consultant was a supplement, and does not break out gsf by component. Reported elsewhere was that the office was 700,000 gsf, the hotel had 250-300 rooms, and the number of condos was 120.

However, a very big distinction between the Chiofaro proposal and Fan Pier and MT, is that Chiofaro retains ownership of most of the property, --square footage representing about $900 million of total cost. The required return represents his carrying costs going forward, e.g., payment of principal and interest on the financing.

In the case of MT, or Fan Pier, the developers have sold their interest in the property, so the financing cost was short-term, and liquidated with the property sale.
 
stellarfun said:
In the case of MT, or Fan Pier, the developers have sold their interest in the property, so the financing cost was short-term, and liquidated with the property sale.
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This is very short-minded thinking and this is why these developers skimp on architecture, quality of building, also could careless about the overall best scenario for the community.

Just build them and flip them. 30-50% returns are pretty dam good.

Most Developers that build & hold usually have a bad economic cycle that usually puts them on the brink of bankruptcy based on Inflation & Deflation along with supply & demand issues concerning certain areas that can bottom-out throughout real estate history.
 
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TheRifleman said:
This is very short-minded thinking and this is why these developers skimp on architecture, quality of building, also could careless about the overall best scenario for the community.

Just build them and flip them. 30-50% returns are pretty dam good.

Most Developers that build & hold usually have a bad economic cycle that usually puts them on the brink of bankruptcy based on Inflation & Deflation along with supply & demand issues concerning certain areas that can bottom-out throughout real estate history.
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Most developers do not have this happen, as they have been in the game long enough, understand the cycles, and are diversified enough to get through the lean years.

The ones that do suffer what you describe often fold. Chiafaro and Trump have filed bankruptcy, but they do not represent developers on the whole.
They are/were big risk takers that don't have as many holdings as many others, and this leaves them more open to market fluctuation.
 
TheRifleman said:
This is very short-minded thinking and this is why these developers skimp on architecture, quality of building, also could careless about the overall best scenario for the community.

Just build them and flip them. 30-50% returns are pretty dam good.

Most Developers that build & hold usually have a bad economic cycle that usually puts them on the brink of bankruptcy based on Inflation & Deflation along with supply & demand issues concerning certain areas that can bottom-out throughout real estate history.
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Your first paragraph is a non sequitur.

Your last paragraph, perhaps unintentionally, describes Chiofaro and IP.

Chiofaro 'lost' IP because he couldn't cover the monthly carrying cost. He was bailed out, from the grasp of Tishman Speyer ('pirates from Gotham' as Chiofaro called them), by Prudential.

http://www.bizjournals.com/boston/stories/2004/05/03/daily55.html

If Chiofaro were to have a $800 million post-construction financing note, i.e., a mortgage, on his Harbor Garage tower(s), for 20 years at 5 percent interest, his yearly payment (principal + interest) to the lender would be around $60 million. If he can't fully lease out the 700,000 sq ft of office space he proposes, and his income from the office lease is, hypothetically, half of what he requires, he is in bankruptcy and foreclosure.

Unlike other developers, who have equity leverage in the other properties they own and can play with it if need be, Chiofaro has very little in IP, as IP is basically owned by Prudential at this point.

All of which means if he can't get a lead tenant to commit to 50 or more percent of the office space he proposes, and if he can't get a hotel company to take a property interest in his proposed hotel, he is dead in the water, and I don't care if it is a 1,000 foot spire, a 700 footer with some manner of cap or crown, or a 400 foot stub, he is friggin dead in the water.

His problem is that his cost of buying a 1.3 acre parcel of land, and a parking garage which he intends to demolish and replace, have set him back about $300 million. That sunk cost simply increases the square foot price point of anything he wants to sell or lease by an extraordinary amount, perhaps to the point it can't be competitively priced.
 
Let me rephrase this:

"Most industry sectors that continue with the same business model that buy & hold usually have a bad economic cycle that usually puts businesses on the brink of bankruptcy based on Inflation & Deflation along with supply & demand issues concerning certain sectors that can bottom-out throughout economic history."

I believe this is for every economic sector not just development. Everything has cycles, Retail, Real Estate, Biotech, Technology ect.

Just look at what is going on with OIL Sector.
 
I know this is a fantasy (but so is this project thread in general) that I have mentioned a couple times before, but I would love to see them leverage the garage-aquarium relationship to build that single tower on the un-built portion of central wharf in front of the aquarium and next to the IMAX theater.

Something like that giant lobby/atrium that was envisioned for the garage location could become the new entrance to the aquarium and provide additional exhibit space/retail along the lines of the expansion that the aquarium has been hoping to do for the last twenty or thirty years.

Even the design of the latest round of renders would complement the design of the existing aquarium and presumably the aquarium could reap some revenue from leasing the land to Chiofaro or at least secure parking for its visitors as some part of the deal.

With the current round of proposals for the garage dead in the water, it seems like building on central wharf is the next logical thing to do with or without linking it to the garage proposal.
 
tangent said:
I know this is a fantasy (but so is this project thread in general) that I have mentioned a couple times before, but I would love to see them leverage the garage-aquarium relationship to build that single tower on the un-built portion of central wharf in front of the aquarium and next to the IMAX theater.
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It sounds more like this would be an additional, separate project. It does nothing to address the issue of the garage walling off the harbor from the greenway.
 
Everytime I drive down the Greenway I'm floored that the public is okay with this garage blocking the waterfront from the Greenway.

Just give him the MASS or HEIGHT.
 
Central Wharf is almost certainly off-limits to development because of Chapter 91.
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It does not matter whether Chiofaro has 1.0 million, 1.5 million, or 2.0 million square feet to work with, he cannot secure the financing for any of those projects.

Walsh, in effect, called his bluff. Chiofaro folded his hand, and the city is now dealing with Prudential.

The likely outcome is that the garage stays above-ground, re-clad, because nobody can absorb the cost of burying it.

The average parking space, including the access aisles, occupies about 330 square feet (31 square meters). Given this size, Column 3 shows the cost per parking space for an underground garage. For example, the average cost of constructing an
underground garage in Boston [in 2012] is $95 per square foot, and the average space occupies 330 square feet, so the average cost of a parking space is $31,000 ($95 × 330). Across the 12 cities, the average cost per space ranges from a low of $26,000 in Phoenix to a high of $48,000 in Honolulu, with an overall average of $34,000 per space. For an aboveground garage, the cost per space ranges from $17,000 in Phoenix to $29,000 in Chicago and San Francisco, with an average of $24,000.
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http://shoup.bol.ucla.edu/HighCost.pdf

Chiofaro's burying the garage costs over $100,000 a space. To recover the cost, is he going to charge 3x or 4x the going rate elsewhere? Hoiw fast do you think he fills the garage at those prices?
 
Great discussion and comments. Those numbers still would be a tough sell on some of the anti-capitalist wingnuts who post under Tim Logan's Globe pieces... Around the time the last of the +400' towers begin to rise (5-6 years?), someone in the Mayor's office or BRA will offer curious wisdom concerning the humongous ugly grey box on the Greenway; 'It's time to take a fresh look the Harbor Garage.'
 
stellarfun said:
Central Wharf is almost certainly off-limits to development because of Chapter 91.
_______________

It does not matter whether Chiofaro has 1.0 million, 1.5 million, or 2.0 million square feet to work with, he cannot secure the financing for any of those projects.

Walsh, in effect, called his bluff. Chiofaro folded his hand, and the city is now dealing with Prudential.

The likely outcome is that the garage stays above-ground, re-clad, because nobody can absorb the cost of burying it.


http://shoup.bol.ucla.edu/HighCost.pdf

Chiofaro's burying the garage costs over $100,000 a space. To recover the cost, is he going to charge 3x or 4x the going rate elsewhere? How fast do you think he fills the garage at those prices?
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Stellar -- Chiofaro should make the project contingent on the financing of the parking spaces-- $100k for a deeded parking space on Beacon Hill or in the Back Bay is a bargain -- there have been spaces that sold for good fraction of $500k

Chiofaro should build the underground garage and sell the spaces or lease them over 25 years to the fat cats who have nice cars that they don't use to often

Then he couples that with a Boston Coach type of private limo taking the owner to / from their car -- assuming that they aren't going to live in his tower

Say he can get $250k per space -- then if he builds a garage with a bit over 1500 spaces [5 floors] all Pez Dispenser style automated car storage -- then he covers his sunk costs + he can use the rest to leverage his financing for the tower
 
whighlander said:
Stellar -- Chiofaro should make the project contingent on the financing of the parking spaces-- $100k for a deeded parking space on Beacon Hill or in the Back Bay is a bargain -- there have been spaces that sold for good fraction of $500k

Chiofaro should build the underground garage and sell the spaces or lease them over 25 years to the fat cats who have nice cars that they don't use to often

Then he couples that with a Boston Coach type of private limo taking the owner to / from their car -- assuming that they aren't going to live in his tower

Say he can get $250k per space -- then if he builds a garage with a bit over 1500 spaces [5 floors] all Pez Dispenser style automated car storage -- then he covers his sunk costs + he can use the rest to leverage his financing for the tower
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Someone clearly didn't go to the Sloan School.

Chiofaro and Prudential financed the original purchase of the garage with a five year $85 million balloon note from a lender in CT. Five years go by, and they re-finance the note in 2013 from the same lender for $90 million, so obviously they didn't buy down any of the original note.

It seems to me that Prudential is sufficiently skeptical of Chiofaro's dream that they offloaded their exposure, so their ownership stake carries little or no risk.

To build a new garage, the existing garage must be demolished. As it becomes a non-performing asset, the loans have to be paid off, so add paying off that debt to the cost of new garage construction.

Accepting your heroic assumption that there are 1380 fools out there who would buy a dedicated parking space beyond any convenient proximity to their residence that they require a livery service between garage and home, why would not Chiofaro sell those spaces in the existing garage, make a very tidy sum, and avoid the expense of burrowing deep for a new garage? Is he really more of a masochist than a real estate mogul?

Finally, lets not overlook the property interest in the existing garage held by the residents of Harbor Towers. Said property interest, IIRC, expires circa 2021. For all practical purposes, there will be no demolition of the existing garage before that date. Chiofaro graduated from Harvard in 1968, you can do the math as to his chronological age in 2022. The window of opportunity for him to develop this site is already all but closed.
 
Stellarfun,

Concerning the Garage. Not burying this off the Greenway is not an option. This is what is best for Boston and the public.

*First off didn't the BRA/City recommend that they would like this site rebuilt with a building?

Don't give me that the developer paid too much for the site. The garage is a money machine. Nobody was going to get this garage cheap.

*Concerning Chap 91--Doesn't this contradicts itself when the garage is actually already doing what the law wants to prevent it from doing. "A Giant wall is blocking the Ocean"
This is why the proposal from the developer should be voided from Chap 91. The Garage is already blocking the Ocean.

Height as much at the FAA allows.
I believe that's 700ft for this location.
(There are not many more sites downtown where they are going to be able to build anything of real substance.)


Transit Location
The location for this development concerning Transit is GOLD.
Building High & close to the Hardrails will relieve the overall traffic. They need to focus developments centralized into the city with easy transit access.
Build as high as you can.
SST
Harbor Garage
Downtown (Millineum Tower)

How can anybody think this Garage is acceptable on the GREENWAY? It's depressing.
Every development is Unique which does need special needs & wants which I'm starting to understand in the complex world of Boston Development.

I actually like this Mayor and I hope the BRA starts to understand that this Garage cannot stay like this. This is not making that area a special place.
The city needs to step up from 900K to 1.3Million SqFt.

Financing
I disagree that Chiofaro/Pru would have trouble finding an Anchor Tenant for this location. This is the best location in the city. So I don't believe they would have trouble finding financing for this.
Perfect location for Commuters and that is what the new generations are looking for easy transit to their jobs.
 
I'm just tuning in. Is there news or just resurrected debate?
 
Rifleman, we have been through this time and again, but it doesn't seem to sink in.

1.) The final decision on what gets built on the Harbor Garage site is not the Mayor's nor the BRA's. It is the Commonwealth's decision, because the property site is subject to Chapter 91. The law was in effect when Chiofaro bought the property, so caveat emptor.

The Commonwealth has apparently told the BRA they will not allow anything more than 900,000 gsf. End of conversation.

2.) The Haymarket garage has more frontage on the Greenway than does Harbor Garage. Perhaps you want to crusade for tearing that down as well. What about the truly ugly garage on Beach St in Chinatown, also on the Greenway?

______________
Shepard, enduring fantasies.
 
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