Columbus Center: RIP | Back Bay
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kz1000ps
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Deal near to give Columbus Center plan a Boost
By Thomas C. Palmer Jr., Globe Staff | December 5, 2006
The troubled, long-delayed Columbus Center project over the Massachusetts Turnpike on the edge of Boston's Back Bay, with a price tag now in excess of $650 million, is close to getting a life-saving financial boost from two agencies this month, according to a senior state official.
Massachusetts Turnpike Authority board member Tom Trimarco said the agency is considering letting WinnDevelopment defer payment of large portions of the $12 million in lease payments that the company owes in exchange for an increase in the amount of those payments. The Turnpike owns the air rights over the highway.
"I'm hoping we're going to reach a decision and present something to the board" of the Turnpike Authority at one of two meetings this month, said Trimarco, who is also the state secretary of administration and finance. "We're still talking with the developer."
WinnDevelopment is proposing to build a complex of towers with hotel, residential, office, and retail space and parks over four blocks of the below-grade Turnpike roadway.
The company was awarded development rights for Columbus Center from the Turnpike almost 10 years ago, and the project's cost has since more than doubled. One of WinnDevelopment's partners in the deal, the California Public Employees' Retirement System, said in August that Columbus Center was at risk of not getting built unless it received more favorable financial terms. It estimated a shortfall of $17 million to $25 million, and as construction prices have continued to push up since August that gap has grown.
"Time is of the essence," said Trimarco .
The Turnpike board is holding a special session tomorrow to deal with a different matter, the Rose Fitzgerald Kennedy Greenway downtown. But Trimarco said the board could take up the Columbus Center matter as well. The Turnpike board is also scheduled to meet later in December.
Trimarco said WinnDevelopment is negotiating separately with MassHousing, the state's affordable housing bank, for about $6 million in loans, at market interest rates, following a $15 million loan the agency had previously agreed to provide under more favorable terms.
A spokesman for WinnDevelopment, Alan Eisner, said the company had been told by state officials that any modifications to its lease "could not impose an additional burden on taxpayers. So we've been trying to deal with that reality while we figure out a way to go forward."
Opponents of Columbus Center have strongly objected to the use of any public help for the project.
If struck, the deals with the two government agencies could put WinnDevelopment on track to begin construction this spring, real estate executives who have been briefed on the negotiations said yesterday. They asked not to be identified because no final deal has been reached.
Increased payments to the Turnpike and MassHousing would come from a resale fee that would be imposed on buyers of the project's condominium residences. It is currently set at 1 percent of the price of a unit. Under the accord now being negotiated, that fee would be increased to 1.5 percent or more, Trimarco said.
Thomas C. Palmer Jr. can be reached at tpalmer@globe.com.
? Copyright 2006 Globe Newspaper Company.
By Thomas C. Palmer Jr., Globe Staff | December 5, 2006
The troubled, long-delayed Columbus Center project over the Massachusetts Turnpike on the edge of Boston's Back Bay, with a price tag now in excess of $650 million, is close to getting a life-saving financial boost from two agencies this month, according to a senior state official.
Massachusetts Turnpike Authority board member Tom Trimarco said the agency is considering letting WinnDevelopment defer payment of large portions of the $12 million in lease payments that the company owes in exchange for an increase in the amount of those payments. The Turnpike owns the air rights over the highway.
"I'm hoping we're going to reach a decision and present something to the board" of the Turnpike Authority at one of two meetings this month, said Trimarco, who is also the state secretary of administration and finance. "We're still talking with the developer."
WinnDevelopment is proposing to build a complex of towers with hotel, residential, office, and retail space and parks over four blocks of the below-grade Turnpike roadway.
The company was awarded development rights for Columbus Center from the Turnpike almost 10 years ago, and the project's cost has since more than doubled. One of WinnDevelopment's partners in the deal, the California Public Employees' Retirement System, said in August that Columbus Center was at risk of not getting built unless it received more favorable financial terms. It estimated a shortfall of $17 million to $25 million, and as construction prices have continued to push up since August that gap has grown.
"Time is of the essence," said Trimarco .
The Turnpike board is holding a special session tomorrow to deal with a different matter, the Rose Fitzgerald Kennedy Greenway downtown. But Trimarco said the board could take up the Columbus Center matter as well. The Turnpike board is also scheduled to meet later in December.
Trimarco said WinnDevelopment is negotiating separately with MassHousing, the state's affordable housing bank, for about $6 million in loans, at market interest rates, following a $15 million loan the agency had previously agreed to provide under more favorable terms.
A spokesman for WinnDevelopment, Alan Eisner, said the company had been told by state officials that any modifications to its lease "could not impose an additional burden on taxpayers. So we've been trying to deal with that reality while we figure out a way to go forward."
Opponents of Columbus Center have strongly objected to the use of any public help for the project.
If struck, the deals with the two government agencies could put WinnDevelopment on track to begin construction this spring, real estate executives who have been briefed on the negotiations said yesterday. They asked not to be identified because no final deal has been reached.
Increased payments to the Turnpike and MassHousing would come from a resale fee that would be imposed on buyers of the project's condominium residences. It is currently set at 1 percent of the price of a unit. Under the accord now being negotiated, that fee would be increased to 1.5 percent or more, Trimarco said.
Thomas C. Palmer Jr. can be reached at tpalmer@globe.com.
? Copyright 2006 Globe Newspaper Company.
Ron Newman
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I'd like to see this built but I really dislike the developer's "subsidize us or we won't build" attitude.
tocoto
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This project is beneficial to the city on so many different levels. Virtually any other city in the country would be gladly subsidizing something like this. If it doesn't get built, it's a real loss for Boston and a condemnation of our ridiculous and expensive approval process. Sometimes I wonder how far into obscurity Boston will let itself fall before people realize a city must invest in itself to survive.
I
IMAngry
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Public subsidies
I wish developers could pay for their projects all on their own.
Maybe the city/state/feds should pay for infrastructure, but that's about it.
I wish developers could pay for their projects all on their own.
Maybe the city/state/feds should pay for infrastructure, but that's about it.
Re: Public subsidies
Or if it's not worth anything to them, they should discontinue the process. (That's the alternative I favor.)
It was slain by the "approval process."IMAngry said:
Here the developer's been handicapped.
If they make the process onerous and expensive they should offer compensation. After all, they're supposedly getting something out of all this, and they should pay for it as eveyone does who gets something worthwhile.
Or if it's not worth anything to them, they should discontinue the process. (That's the alternative I favor.)
Columbus Center has been handicapped far more by construction costs than the approval process (which was indeed onerous but probably not much worse than what a similar project would experience in any other big American city).
Obviously, the project will provide benefit to the city. The issue is one of priorities; should we be subsidizing this or things like education, healthcare, or homeless programs?
Obviously, the project will provide benefit to the city. The issue is one of priorities; should we be subsidizing this or things like education, healthcare, or homeless programs?
I
IMAngry
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Government giveaways
You're right, the Columbus Center wouldn't disappear, like a baseball team. And it won't "relocate", like a business.
However, I am pretty much assuming the $12 million in lease payments (each year, or over a set period of time, or what?) will never make their way to the turnpike authority; it will be the first thing given away, if the developer cries poor.
I don't know if I have a problem with that ... yes, the land (or "air") has value, but who cares ... the city benefits from the property taxes, so it's a wash.
I just think people should be honest. They want something for free, so say so.
I am particularly steamed by a similar situation down the street from there.
The Renaissance Charter School got a sweetheart deal when they bought the old UMASS Boston headquarters building - $2 million, plus a low-cost loan for $12 million.
Now, they're selling it. They'll pocket the cash? Why? They paid below market back in the mid-1990's, and now they're taking the money and running.
It's our money, as taxpayers.
You're right, the Columbus Center wouldn't disappear, like a baseball team. And it won't "relocate", like a business.
However, I am pretty much assuming the $12 million in lease payments (each year, or over a set period of time, or what?) will never make their way to the turnpike authority; it will be the first thing given away, if the developer cries poor.
I don't know if I have a problem with that ... yes, the land (or "air") has value, but who cares ... the city benefits from the property taxes, so it's a wash.
I just think people should be honest. They want something for free, so say so.
I am particularly steamed by a similar situation down the street from there.
The Renaissance Charter School got a sweetheart deal when they bought the old UMASS Boston headquarters building - $2 million, plus a low-cost loan for $12 million.
Now, they're selling it. They'll pocket the cash? Why? They paid below market back in the mid-1990's, and now they're taking the money and running.
It's our money, as taxpayers.
In a true free market, the developers would have been allowed to build to a height at which cost vs. profits could be maximized. Instead, the developers have been limited to a less profitable height because other interests have been given priority.
Ron Newman
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A "true free market" is a dubious concept when we're talking about building on air rights above a publicly-owned highway. This isn't private property in the usual sense of that term.
I personally don't have a problem with the city/state providing funding for this project. It is a good project that will provide benefits long after this initial 'public loan'.
There are a couple of reasons the developer is looking for funds. First the construction costs have gone up second the real estate market has softened. Both of these are out of the developers control.
However, people seem to forget all of the concessions that were squeezed into the budget to get the project where it is today. Originally this project was only going to cover 2 parcels, but because of the pseudo zoning document called the Civic Vision, they were forced to include a 3rd parcel to increase building height on parcel 16. Then for good measure a forth parcel (19) was added as a park at the very end because everyone wants more open space.
The developers made these changes without increasing the overall square footage of the project. I don't have the numbers, but I actually think the square footage decreased from the original proposal.
If anyone knows about development, then you will know it is all about square footage and how much money you can get in return per foot. The banks/lenders are only going to loan a developer money if they think they are going to make money on there investment. Sometimes I think people believe that developers are sitting on piles of cash. Truth is that on a construction project like this they will be getting funds released to them on a monthly basis. The banks will have there own inspectors to verify percent complete, etc.
Developers are really just the middleman coordinating these projects for a fee.
There are a couple of reasons the developer is looking for funds. First the construction costs have gone up second the real estate market has softened. Both of these are out of the developers control.
However, people seem to forget all of the concessions that were squeezed into the budget to get the project where it is today. Originally this project was only going to cover 2 parcels, but because of the pseudo zoning document called the Civic Vision, they were forced to include a 3rd parcel to increase building height on parcel 16. Then for good measure a forth parcel (19) was added as a park at the very end because everyone wants more open space.
The developers made these changes without increasing the overall square footage of the project. I don't have the numbers, but I actually think the square footage decreased from the original proposal.
If anyone knows about development, then you will know it is all about square footage and how much money you can get in return per foot. The banks/lenders are only going to loan a developer money if they think they are going to make money on there investment. Sometimes I think people believe that developers are sitting on piles of cash. Truth is that on a construction project like this they will be getting funds released to them on a monthly basis. The banks will have there own inspectors to verify percent complete, etc.
Developers are really just the middleman coordinating these projects for a fee.
I
InTheHood
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I'm not sure that both sides here (pro-Gov't aid and anti-Gov't aid) are missing the point.
On the one hand it's not just a question of the approval process ... yes this adds costs but frankly those are all "sunk costs" and completely irrelevant to the current calculus of whether or not Columbus Center gets built. I don't mean to pick a fight with anyone, but sometimes I get exasperated by repetitive posts that suggest that we'd have fifty more skyscrapers if only the permitting process were more streamlined, efficient, and permissive. While red tape does cause some distortions, and I also get exasperated by some of the extremes, the real reason projects like this stall is basic economics. They are risky. Look at what's happened to the condo market lately, and think what it takes to market hundreds of units on the very high end. That's ultimately more important to the delay on CC than even the run-up in the price of steel and has zippo to do with the (completed) permitting process.
On the other hand, those who sniff that it should all be left to the market and are troubled by the prospect of a subsidy seem to be ignoring the reality that it is ungodly expensive to build over a highway. By definition these projects face a huge handicap versus competitors. Case in point: the Clarendon project, about fifty feet away from CC, which will be marketing high-end condos to the exact same target customers, seems to be moving more quickly. Why? Because it's so much cheaper to build on solid ground. Think about the logistical challenge of building a complex with traffic whizzing underneath - the expense of the police details, the off-hours constraints, etc. For this reason, the CC developer was allowed to build a bit taller than he otherwise would have been allowed to, and that's also why the City did not push for a more competitive process when CC was put to bid. But it's far from clear that these "little edges" give the developer enough help to offset the natural advantage enjoyed by non-air rights projects. If we "left this all to the free market" we might NEVER get a project built over a highway. The Pru/Copley projects had significant baked-in subsidies. Think about this logically ... if there wasn't a huge difference in costs to build over a highway, why isn't the FDR Drive one long tunnel? It's not like the good citizens of Manhattan couldn't envision the benefits of doing so ...
On the one hand it's not just a question of the approval process ... yes this adds costs but frankly those are all "sunk costs" and completely irrelevant to the current calculus of whether or not Columbus Center gets built. I don't mean to pick a fight with anyone, but sometimes I get exasperated by repetitive posts that suggest that we'd have fifty more skyscrapers if only the permitting process were more streamlined, efficient, and permissive. While red tape does cause some distortions, and I also get exasperated by some of the extremes, the real reason projects like this stall is basic economics. They are risky. Look at what's happened to the condo market lately, and think what it takes to market hundreds of units on the very high end. That's ultimately more important to the delay on CC than even the run-up in the price of steel and has zippo to do with the (completed) permitting process.
On the other hand, those who sniff that it should all be left to the market and are troubled by the prospect of a subsidy seem to be ignoring the reality that it is ungodly expensive to build over a highway. By definition these projects face a huge handicap versus competitors. Case in point: the Clarendon project, about fifty feet away from CC, which will be marketing high-end condos to the exact same target customers, seems to be moving more quickly. Why? Because it's so much cheaper to build on solid ground. Think about the logistical challenge of building a complex with traffic whizzing underneath - the expense of the police details, the off-hours constraints, etc. For this reason, the CC developer was allowed to build a bit taller than he otherwise would have been allowed to, and that's also why the City did not push for a more competitive process when CC was put to bid. But it's far from clear that these "little edges" give the developer enough help to offset the natural advantage enjoyed by non-air rights projects. If we "left this all to the free market" we might NEVER get a project built over a highway. The Pru/Copley projects had significant baked-in subsidies. Think about this logically ... if there wasn't a huge difference in costs to build over a highway, why isn't the FDR Drive one long tunnel? It's not like the good citizens of Manhattan couldn't envision the benefits of doing so ...
I
InTheHood
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Fair point, kz. Clarendon began years after CC but also seems slow ... the one sign of progress is the Post Office relocation.
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