Boston Properties is preparing to convert the 65 remaining condominium units in its $550 million, mixed-use Russia Wharf development in Boston to rental apartments, sources have indicated to Banker & Tradesman.
Previously, Boston Properties had sought BRA approval to significantly reduce the number of residential units in the waterfront development, from 215 to 65. The developer made that change in order to secure construction financing for the 31-story, 854,000-square-foot tower. Even with Boston Properties' steep cuts to its residential program at Russia Wharf, a club of five banks only offered the REIT a $215 million loan, with tough recourse provisions.
Lenders' reluctance to fund new condominium construction helped sink financing for Vornado and Gale International's Filene's redevelopment downtown, and it forced Lincoln Property Co. to swap condos for office space at 316-322 Summer St. in Fort Point.
By contrast, lenders remain willing to finance new rental housing, in part because the secondary market remains more liquid than other areas of commercial finance. Swapping condos for rentals now will allow Boston Properties to generate immediate cash flow from the development's residential units, with the option of converting them back to condos down the road, if a dearth of new construction leads to an increase in condo prices, as some have predicted.
Russia Wharf's 750,000 square feet of office space will be anchored by Wellington Management. The building is scheduled to open in early 2011.
Boston Properties did not return calls seeking comment.
