Columbus Center: RIP | Back Bay

[Ron Newman]

Re: Columbus Center

Amazing, I actually agree with a Herald editorial. Doesn't happen very often.

 

[pelhamhall]

Re: Columbus Center

Although I'm sad about the lack of progress on this project, this is a great spectator sport.

Winn digs up the site with no real construction money in hand, and then halts construction when they don't get the public handout they need/want "we're taking our ball and we're going home!" they kick and scream. A dramatic move.

Then the BRA calls their bluff and tells them "fine, but if you want to go home, first you have to pay us in order to take your ball and go home - and you have to pay to clean up the mess you made"

So Winn's mouthpiece comes out with "Wait! We never said we really wanted to go home, maybe you should just reconsider our request and we'll stick around?"

We'll see where this ends up. Now all the players are positioning and strategizing. Even Neddy and the Neighbors are still working feverishly to create storylines and animosity towards this project. (shadows/height were used, that groundwater table thing was already used, this UFP nonsense may have some potential, hmm... maybe they can identify a rare lichen or moss that grows on the site that needs to be "saved" or spot a rare bird that landed there once or something)

Everyone's on the move and the situation is very fluid - which is the fun part when watching a sport like this - because anything can happen and emotions are raw. I'm expecting more big headlines and big fights to come. This is making everyone look bad (except maybe DiMasi), and in these no-win situations, the muck that starts flying has a tendency to get dirty - more fun for the spectators!

I'm also expecting this project to get built - as is - once the credit market steadies itself. At the end of the day, that is the only issue facing this project right now. There's no money to be had, you need money for a project like this.

 

[ChunkyMonkey]

Re: Columbus Center

I don't understand how the entire project can hinge on $10 million. Is it really worth it for the developers to walk away on what is a a relatively small sum when compared to the $800 million that they were planning to spend, not to mention the millions they have already spent.

 

[stellarfun]

Re: Columbus Center

If Palmer is correct in saying CalPERS has sunk costs of $70 million in the project already they are not going to walk away from that. I tend to think some other big player will come in.

CalPERS had basically financed the deck, so that financing is still in place. I'm still of the belief that Winn was seeking all this state money to bolster his own ownership stake in what is built above the deck.

And there is money out there in the credit markets. Carlyle Group, which went belly up on a $22 billion fund but a few days ago, announced they would buy 650 Madison Ave. for $700 million. 650 Madison is 500,000 sq ft

 

[stellarfun]

Re: Columbus Center

if someone wants to post it, there is another depressing article on the future of this project on banker and tradesman.

From the Banker & Tradesman website today:

MassHousing Will Not Close On Columbus Center Commitments
Due to a misstatement from MassHousing, it was reported Tuesday that the state?s affordable housing bank had withdrawn $20.6 million in loan commitments for the controversial Columbus Center development in Boston?s South End.

I'm not a subscriber, so I don't know what more was written. But this gets curiouser and..........

 

[statler]

Re: Columbus Center

Banker & Tradesman - April 8, 2008

MassHousing Withdraws Funding For Columbus Center
By Thomas Grillo
Posted 4/8/08 @ 2:50 PM

This artist?s rendering depicts Columbus Center, the controversial 1.5 million-square-foot project to be built above the Massachusetts Turnpike in Boston.

Another state agency has abandoned Columbus Center.

MassHousing, the state?s affordable housing bank, has withdrawn $20.6 million in loan commitments for the controversial project that was to be built above the Massachusetts Turnpike in Boston?s South End.

The loans, pledged in 2006, would have been used to leverage 44 affordable condominiums in the mixed-use project near the turnpike entrance by Columbus and Arlington streets. But the loans were never issued.

MassHousing?s determination comes on the heels of the Patrick administration?s withdrawal of a $10 million Massachusetts Opportunity Relocation and Expansion Jobs Capital (MORE) grant for Columbus Center. The Boston Globe reported today that the state decided against funding the project after months of delays.

"When the state withdrew its commitment of MORE money, we felt we could not proceed with closing the MassHousing loan," said Thomas Farmer, a MassHousing spokesman.

Construction was expected to begin in 2005 for the $800 million air-rights project that would be built ?in the air? on a deck over the highway and railroad tracks near the Back Bay MBTA station. When completed, the proposal would have included a 35-story glass tower and four 11-story buildings housing 451 condos, a 180-room hotel and a parking garage.

Funding problems have plagued the massive development as construction costs soared.

A state official said WinnDevelopment?s managing partner, Roger Cassin, has failed to demonstrate that his company had the financing to make the project a reality. ?It began to look like a house of cards,? said the official, who did not have authorization to speak for the state. ?Every funder has gotten cold feet and wants out.?

Cassin said he was unaware MassHousing had pulled its funding. He told Banker & Tradesman that he plans a meeting with public and private funders to the get the project back on track.

 

[statler]

Re: Columbus Center

I missed this correction to the B & T story:

B & T - April 9, 2008

MassHousing Will Not Close On Columbus Center Commitments


Due to a misstatement from MassHousing, it was reported Tuesday that the state?s affordable housing bank had withdrawn $20.6 million in loan commitments for the controversial Columbus Center development in Boston?s South End.

MassHousing said Wednesday the agency has not withdrawn its commitment. But they will not close on the pair of loans because the state withdrew a $10 million Massachusetts Opportunity Relocation and Expansion Jobs Capital (MORE) grant for Columbus Center.

The agency stressed it may reassess the situation should it change in the future.

?MassHousing has considered the commitment of public money from the state crucial to the success of Columbus Center,? said Thomas Farmer, a MassHousing spokesman.

 

[stellarfun]

Re: Columbus Center

^^^ It sounds as if somebody high in the Patrick Administration spoke to MassHousing and they reversed themselves. Grillo's March 8 story had an unequivocal quote (to borrow a Winn adjective), and by today, the quote was no longer operative.

 

[vanshnookenraggen]

Re: Columbus Center

Columbus Center is dead. Long live the Columbus Center!

Ok it is probably too soon to declare that but this is looking deader by the day. Maybe in another 13 years.

 

[Ned Flaherty]

Re: Columbus Center

A project that has lower profit margins is riskier than a project that has higher profit margins . . . From an investor?s point of view, the amount of profit and the degree of risk are inextricably linked . . .

Risk isn?t the only factor affecting profit, and profit isn?t the only factor affecting risk. Of course, profit and risk are linked; I never said they weren?t. But profit and risk are different. Likewise, hearts and lungs are inextricably linked, and a failure of either kills the organism, but nevertheless, they are different. The condition of one is not defined solely by the condition of the other.

. . . Are you able to provide any evidence (of Columbus Center?s unusually high profit projections)?

Anyone needing to see Columbus Center?s profit projections, among thousands of other pages of information, can get the public subsidy applications, read them, and assemble all the pieces themselves, the same way that I did. The latest subsidy set resulted in:

$ 1,146,096,618 completed value
$ 0,800,000,000 cost
$ 0,346,096,618 profit (if no subsidies are used)

Most subsidy agencies admit that they do little to no outside confirmation of the information submitted to them in subsidy applications. That makes the truthfulness of California?s numbers difficult to assess.

 

[Ned Flaherty]

Re: Columbus Center

This isn't an industrial or office development, so I don't know why someone from NAIOP would have a relevant opinion. . . What becomes of the developer's $270 million guarantee that they would complete the deck?

Hello, Ron.

Re: NAIOP, you're correct; the NAIOP opinion isn't relevant. It was inserted by the reporter so there would be some pro-development authority in the article. There are better sources available, but they're becoming increasingly reluctant to flag-wave for this project.

Re: guarantees, the re-negotiated lease included $285 million in tunnel-related guarantees to MTA. The amendment took 23 months to finalize, but then MTA scrapped it when California shook hands on it, and then asked for an extra 18 months. Since the amendment containing the guarantees was scrapped, MTA has none of them right now.

 

[Ned Flaherty]

Re: Columbus Center

Is there a problem too with a developer making a profit, even if it is a large one?

Hello, Cojapo.

I participated in the public process for the last 13 years, and heard people speak from all sides of all issues. No one ever said developers should not profit, or that developers are not entitled, through ingenuity, resources, or luck, to large profits.

What most citizens have said consistently, however, is that no developer is entitled to propose a project as subsidy-free just to get approved, and then seek, say, 15 subsidies totaling hundreds of millions, just to pay costs and profits that were proposed as subsidy-free.

There are projects that society sometimes decides to subsidize after considering costs and benefits. This is not one of those; society never made a decision to subsidize it, because it was proposed as subsidy-free. The high resistance to subsidies for this project stems from the non-subsidized-to-subsidized switcheroo.

 

[Ned Flaherty]

Re: Columbus Center

. . . This project is not dead for two reasons - 1) there isn't another site like it to build this much density and height . . . 2) It's all approved and ready to go and enjoys widespread city support

It?s not necessarily true that just a project will succeed just by using an advantageous site. Whatever this site?s benefits, they haven?t been magical enough to make the project succeed, even after 13 years of trying, so clearly there are other problems.

Also, the project has never been ?all approved.? It?s now farther away than ever. Other than basic permission to build, the most critical approvals are the ones that provide funding. Over the last 4 months, the media have reported, and the owners haven?t disagreed, that of the $800 million needed, $293 are in place, but $507 are missing and increasingly unobtainable. The approvals for most of the money that would build most of the project have never been given.

And, if by ?city support? you mean the mayor and councilors, a majority of them do want it built, while many of their constituents do not. And not one of those politicians has ever been willing to do what?s needed most: reserve current dollars to fund construction. The types and levels of today?s support offer none of what the project needs most: cash.

 

[Ned Flaherty]

Re: Columbus Center

. . . What does CalPERS (MacFarlane) do now with respect to its [$70 million] sunk costs?

Stellarfun,

I believe there are at least 6 options, not just 4.

1. Let Winn go, and finish it alone.
2. Replace Winn, and finish with the new partner.
3. Write off the loss now, and depart.
4. Sell all to the highest bidder, and depart.
5. Wait.
6. Recover the loss to date by suing Winn (see below).

Winn gave CalPERS-CUIP-MURC a prospectus in 2005. That proposal persuaded CalPERS-CUIP-MURC to take a leap of faith. Yet life today has turned out very differently:

■ 2 years behind schedule
■ lease in default
■ must guarantee MTA $285 million to resume work
■ amendment negotiated over last 2 years now scrapped
■ cash from state unstable and/or fading
■ no cash from city
■ no cash from federal level

It?s certain that Winn?s prospectus did not predict these 7 outcomes. So the West Coast teams now can rightfully ask themselves:

● Since selling to CalPERS, in what ways has Winn failed?
● What did Winn claim that was not true?
● What did Winn not disclose at all?
● What else may come to light?

 

[Ned Flaherty]

Re: Columbus Center

the technical back and forth kicks ass, but it doesn't speak to the man on the street issues. even if you're right, Ned, i don't believe for a second that the California EPA CARB Handbook is what gets you up in the morning. . .

I agree the discussion lost its way from street-level issues. I first mentioned the CARB Handbook only because someone else asked about it. Now, it?s stayed the center of debate for a while, because one member used to work at EPA, as though the Handbook itself is the issue. It isn?t.

. . . what productive thing would you do with a 30+ ft deep by 150+ foot wide particulate-rich cut through what would otherwise be a very attractive location, given the technical difficulties of converting the space?

After evicting the current, un-funded/never-funded squatters, I?d do the same thing I?ve worked for since moving here 18 years ago: treat air rights as a public asset, follow the Turnpike Master Plan, and obtain multiple, competitive bids with public audits.

 

[Ned Flaherty]

Re: Columbus Center

It's odd to think that something that started when I was five will not be completed until after I graduate from college in four years...sigh....such is Boston.

Hello, NeDev18.
The time-to-complete is neither the most positive, nor the most negative ? characteristic about this. And there are wider possibilities than just time-to-finish: it may never be completed at all, and something else may be completed instead. When the goal is the journey as much as the destination, the learning is different. Many have learned much from a process that is ending badly, but that learning is worthwhile; e.g., the next proponent will, in all probability, not repeat the mistakes just committed.

 

[sidewalks]

Re: Columbus Center

RE: the quote below

Ned, I hate to sound unkind...But I work in real estate development and evaluate the financial viability of projects on a day to day basis. So I find it mildly annoying when someone is pontificating about a subject which they appear to have little or no understanding. I don't know what you are trying to get at with your heart and lung metaphor, but it is obtuse at best.

Further to the point...your citing of the value vs. cost calculation is more than a bit questionable. In fact, it is irrellevant. You have no idea what the costs and value of this project are. If you think you do, I would love to hear what your breakdown of the individual elements are. For example: What is the estimated sales price per square foot of the condos in this project. TODAY? What is the value of the hotel rooms per key. TODAY? What is the estimated retail and office rents that the developer can expect to attain. TODAY? How much will he have to pay in tenant improvement? What are the current construction costs? Wait on that one...does your number take into account the commodity appreciation of steel, concrete and wood that has occurred since the last cost estimate?

The answer is...YOU DON'T KNOW, because such an evaluation would require a wide array of market information that you don't have available. It would require extensive data from office, retail and hotel brokers...it would require enormous input from the contractor...it would require information about financing and interest rates...it would require information about phasing and lease up periods...and I'm guessing that the figure you quoted below was not generated by such a diligent analysis. It likely came from a dated spreadsheet that neither the developer nor anyone in the profession would invest any value in at this point in time.

The point being, don't make claims about how exceptionally profitable this project is, because there is no legitimate basis for making such statements.

Risk isn?t the only factor affecting profit, and profit isn?t the only factor affecting risk. Of course, profit and risk are linked; I never said they weren?t. But profit and risk are different. Likewise, hearts and lungs are inextricably linked, and a failure of either kills the organism, but nevertheless, they are different. The condition of one is not defined solely by the condition of the other.


Anyone needing to see Columbus Center?s profit projections, among thousands of other pages of information, can get the public subsidy applications, read them, and assemble all the pieces themselves, the same way that I did. The latest subsidy set resulted in:

$ 1,146,096,618 completed value
$ 0,800,000,000 cost
$ 0,346,096,618 profit (if no subsidies are used)

Most subsidy agencies admit that they do little to no outside confirmation of the information submitted to them in subsidy applications. That makes the truthfulness of California?s numbers difficult to assess.

 

[Ned Flaherty]

Re: Columbus Center

I don't understand how the entire project can hinge on $10 million. Is it really worth it for the developers to walk away on what is a relatively small sum when compared to the $800 million that they were planning to spend, not to mention the millions they have already spent.

Hello, ChunkyMoney.

You are correct. The entire project does not really hinge on a small $10 million, especially since $110 million has already been spent: $40m by Winn, $70m by CalPERS-CUIP-MURC.

When you read the public subsidy applications, 2002-2008, a more complex picture emerges, because no two agencies were told the same fiscal story. Many were led to believe claims that were later found untrue.

Yet to be disclosed is what each individual developer ? Winn, CalPERS, CUIP, MURC, and the phantom bank ? promised the others, and how well those promises panned out. No partner would say that today?s status turned out as it was proposed several years ago.

 

[Ned Flaherty]

Re: Columbus Center

Stellarfun,

. . . CalPERS had basically financed the deck, so that financing is still in place.

No, deck financing is not still in place. CalPERS tentatively offered to finance the deck, under a string of conditions laid out on 15 March 2006, just as Anglo Irish Bank tentatively offered to finance the buildings, in a string of conditions laid out on 10 May 2006. Just as the bank?s conditions were never met and their potential loan offer expired in September 2006, so, too, CalPERS? conditions were never met, which is why construction today is 2 years behind schedule, and halted.

. . . I'm still of the belief that Winn was seeking all this state money to bolster his own ownership stake in what is built above the deck.

State subsidies have no effect upon Winn?s ownership. Initially, Winn sought city, state, and public subsidies so as to attract a big investor and a big bank with subsidies that would pay both costs and profits. Since March 2006, it?s been CalPERS-CUIP-MURC-CWCC seeking subsidies, also to pay costs and profits.

But none of the state subsidies sought to date could improve Winn?s quite small ownership percentage, because that is a fixed amount, by agreement among the partners, and any subsidies paid out would go to pay the costs and profits of the private venture now owned by CalPERS called CWCC (California Public Employees Retirement System California Urban Investment Partners MacFarlane Urban Realty Company Winn Columbus Center Limited Liability Company, a Delaware Company).

That is why I continue to remind media, legislators, community leaders, and forum members that California state wants Massachusetts taxpayers to fund its privately owned venture.

 

[JimboJones]

Re: Columbus Center

No disrespect to any poster, but I'm wondering, is there any way to put someone on "IGNORE" if we don't want to see the comments?