Is Columbus Center up in the air?
Major investor says the $650m project is at risk without more aid, new lease
By Chris Reidy, Globe Staff | August 25, 2006
A major investor in the proposed $650 million Columbus Center mixed-use development says the urban village to be built over Interstate 90 is ``at risk" unless the Massachusetts Turnpike Authority renegotiates more favorable terms for its air-rights lease and the state considers more public assistance.
``Our ability to proceed with this development without restructuring of lease payments and receipt of necessary state funding is at risk," the investor wrote in a letter to the authority obtained by the Globe.
The letter, which notes Columbus Center is facing cost overruns, came just as the developer was getting ready to begin construction on a huge project that proposes building housing, a hotel, and parks on a deck over the Massachusetts Turnpike. When completed, something once expected to happen in 2010, it would reconnect the Back Bay and South End neighborhoods, which are separated by the turnpike.
The investor saying the project is at risk is a joint venture of the California Public Employees' Retirement System and MacFarlane Urban Realty Co., a San Francisco real estate investment firm.
Because of soaring construction costs, Columbus Center's price tag has jumped $26 million since the spring to $650 million , said Roger Cassin , managing partner of WinnDevelopment of Boston, the project's developer; deck construction costs have increased to $118 million from $54 million in three years.
For the entire project, ``we're now looking at a shortfall of $17 million to $25 million," he said.
That must be addressed before Winn can close on a construction loan of more than $400 million, Cassin said.
One way to address the shortfall is to get more public assistance.
Critics contend Winn promised during the permitting process that it would not seek public assistance, something Cassin denies. The project is in line to receive about $22 million in various forms of public assistance, he said.
``Taxpayers should not be subsidizing developers' profits," said state Representative Martha M. Walz , a Boston Democrat.
A request to restructure the air-rights lease is ``code for saying we want cheaper rents," she said. ``If costs are going up, the developer should take smaller profits."
The joint venture's letter was addressed to John Cogliano, who recently became Turnpike Authority chairman after Matthew Amorello's departure.
A copy of the letter was sent to the Massachusetts Housing Finance Agency , which has earmarked a $15 million low-interest loan to Columbus Center. It made a copy of the letter available to the Globe.
Calls to Calpers were referred to MacFarlane, which declined to comment.
Dated Aug. 18 and signed by MacFarlane's chief operating officer, Thomas Klugherz , the letter criticizes the Turnpike Authority for repeatedly refusing to meet with the Columbus Center team. Klugherz argued the lease needs to be renegotiated because market conditions have changed. While construction costs escalated, the housing market softened, diminishing the money the project can make from selling its 450 condos.
``The authority's continuing lack of response has put project viability at risk," wrote Klugherz, requesting a meeting with Cogliano.
That meeting could happen as early as next week, said Jon Carlisle , Cogliano's spokesman.
``Whatever decision is made will reflect the best interests of toll payers and taxpayers," Carlisle said.
Klugherz's letter noted that Winn has invested $36.5 million in the project and that the joint venture has agreed to provide up to $140 million.
The long-term lease currently calls for Winn to pay $12.2 million , Cassin said. In addition, the Turnpike Authority would receive 1 percent of the proceeds of resales of the project's condos. According to Winn, that's worth $80 million to $100 million.
It took years to complete the permitting process for Columbus Center. Critics complained the project was too massive. They claimed Winn argued that the project needed to be big so it could attract investors who would pay for it with private financing.
``They said, `It must be gigantic, or we'll go broke,' " recalled Ned Flaherty , a project critic.
Critics were upset because they said that Winn sought public assistance without reducing the project's size.
According to Winn, Columbus Center will provide 2,500 union construction jobs and create 350 permanent jobs. Winn says it will provide $40 million in public benefits, including four public parks and 44 units of on-site affordable housing.
Councilor at Large Stephen J. Murphy, of Hyde Park, said Columbus Center is supported by many public officials. ``It would be a travesty if this falls through," he said.
Cassin said that won't happen.
``Nobody's going to let this fail," he said.
Chris Reidy can be reached at
reidy@globe.com.
? Copyright 2006 Globe Newspaper Company.
I don't know about you guys, but I really hope that this doesn't impact the project too much. I would really like to see the pike covered and that immediate area spruced up a bit. I hope this is an issue that can be resolved quickly.
