Condos in Financial District hit funding snag
Boston Business Journal - January 26, 2007
by Michelle Hillman - Journal Staff
Financial troubles have shut down construction of the 44-unit Broadluxe condominium project on the edge of Boston's Financial District for the past two weeks, setting the developer back in a time of market uncertainty.
The project, located at 99-105 Broad St. near the future Rose Kennedy Greenway, is a little more than month away from its scheduled opening.
Chip Norton, a manager at Boston-based Franklin Realty Advisors Inc., declined to give specific reasons for the recent financial difficulties.
"Basically we've had some cost overruns and delays in delivering the building," said Norton. "We are working with our lenders to restructure the existing financing."
Certain neighborhoods like the Financial District have been sluggish to catch on with buyers who are not sure the area has matured, said Debra Taylor Blair, president of the Listing Information Network, which tracks sales in downtown Boston.
"When you move in toward the Financial District, it's just that the neighborhood isn't there yet," she said.
At 99-105 Broad, contractors from A.J. Martini Inc. were called off the job after Franklin Realty Advisors failed to pay the Winchester construction company for work.
"There were some funding issues," said Paul Martini, chairman of A.J. Martini. "We hadn't been paid in a relatively brief period of time and were somewhat concerned."
In addition to a $19.1 million construction loan from TD Banknorth, Norton said there is other capital invested in the project but wouldn't say if it was private money or through another lender. The project was originally slated to be finished by the end of last year, but Martini said Franklin Realty ran into problems when it began converting the seven-story, brick-and-beam structure built in 1888.
Martini said the construction involved tying two historic buildings together, which required the relocation of elevator shafts and staircases.
In addition, there were concerns about whether the original buildings were strong enough to support a three-story addition. Martini said the age and condition of the buildings caused the project cost to escalate by about 10 percent.
"Rather than continue down an unknown road, we took them to task," said Martini. "There was some concern on our part where the money was coming from."
Franklin Realty Advisors' Norton declined to comment about the residential market or location of the project and whether either had an effect on the construction schedule. He also declined to confirm if any units had been pre-sold, but did say he expected Broadluxe to be open "very soon."
Located a block away from another condo project called Folio Boston at 80 Broad St. -- where an auction was held last year to sell the remaining 34 units -- Broadluxe may have fallen victim to bad market timing. Condominium sales have cooled since 2005, said Matthew Blackham, a project analyst with Tambone Investment Group, which converted an existing commercial building at 199 State St. into Greenway Place, a 13-unit luxury loft project.
Blackham said five of the 13 units at Greenway Place have been sold for between $850,000 and $1.4 million. Though sales of condos have slowed, Blackham said he's been able to hold the per-square-foot price for the units, which are located directly in front of the future greenway.
"The market conditions have certainly changed," said Blackham. "We would like to be sold out but we're fairly happy with the sales we've produced to date."
Greenway Place and Folio Boston opened in the first half of 2006, giving the developers the chance to capture pre-sales during construction. As Franklin Realty works to arrange additional financing, the project will open at a time when fewer units are selling.
"About the time that we finished constructing the building, activity in downtown had slowed but prices remained the same," said Michael Rauseo, president of Suffolk Cos. and managing member of 80 Broad Street LLC, which developed Folio Boston. Rauseo said that during the construction of 80 Broad, which finished last June, he sold 65 of the 99 units.
Michelle Hillman can be reached at
mhillman@bizjournals.com
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