OFF CENTERThe Columbus Center project has stalled, leaving in its wake piles of dirt, idle
Boston Business Journal - by Mary K. Pratt Special to the Journal
It was a grand vision: a massive, ambitious development that would cap the Massachusetts Turnpike and transform seven acres in Boston's South End into a chic mix of homes, hotels, shops and parks.
Today, after a decade of planning and debates, the area is a dreary vista of cyclone fences, idle machinery, dirt piles and construction signs that were meant to be temporary but have become fixtures of the local scenery.
Columbus Center is in limbo, and no one knows when it'll emerge -- a victim of escalating project costs and stalemates over funding.
The project's developers and city officials urge patience, saying they're committed to seeing the project through. But no one is quite sure where to go from here. Neither does anyone have any idea of how this type of impasse could have been avoided -- or how such an impasse can be avoided on future projects.
"Could have, would have, should have -- it is what it is," said George Regan, founder of Regan Communications Group and spokesman for the developer, Boston-based WinnDevelopment.
John Palmieri, director of the Boston Redevelopment Authority, was to meet this week with WinnDevelopment managing partner Roger Cassin and hopes to gain a clearer idea of Columbus Center's future, as well as the main sticking points with the project.
"It's a very important and large project, and it took years for it to come together. The mayor supports this, and certainly (the developer) demonstrated good faith. But this has been a long and tedious process for them and us, and I think we owe them some time," he said.
Rep. Byron Rushing, D-Boston, whose district includes the South End, said he doubts "if we're going to learn enough to know how to prevent this in the future."
"I have no idea what's going to happen, and I think it's outrageous that we have a project that has essentially prevented any other proposal for air rights in the South End to come forward because they have complete development rights over this land," he said.
According to approved plans, the Columbus Center calls for a variety of buildings, ranging from four to 35 stories high; they'll hold condominiums, including some affordable housing units, a hotel, a parking garage, retail space and parks spread over seven acres on four parcels.
WinnDevelopment recently obtained an 18-month moratorium on construction. Spokesman Alan Eisner squarely put the need for the construction moratorium on funding, and he singled out the state's decision on its committed monies as part of the problem.
"(Site work) did begin in anticipation of receiving all of our funding from the state, but that did not materialize, and our key investor decided without those state funds it didn't make any sense to move forward," Eisner said.
Some question these assertions, noting that the public money committed to the project represented a small percentage of the overall price tag.
"They say they needed the state piece to come together first to get other equity and financing in place, and that may be true. But it shouldn't have been the breakdown point. It's an $800 million project," Palmieri said.
The city of Boston committed about $15 million to the project through tax increment financing, a form of bond-financed funding. Palmieri said the TIF funding is still there, but WinnDevelopment has to demonstrate that all the other financing is in place before it can receive the money.
State financial commitments are in a similar spot -- not pulled but not ready to be handed over. The state had awarded a $10 million Massachusetts Opportunity Relocation and Expansion Jobs grant last year on a preliminary basis, subject to a second round of consideration. But given the delay in construction, the state has decided it will not award the money at this time, said Kofi Jones, spokeswoman for the Executive Office of Housing and Economic Development.
"The administration decided that it would be the best use of the funds to redirect them to projects that were prepared to move forward and provide economic development and job growth in the immediate future," she said, stressing that the developer can reapply for grant money in the future.
Likewise, MassHousing, which had committed $20.6 million, decided it could not close on the loan at this time but said in an official statement that the commitment is still there.
Regan said these were just factors in a "perfect storm of financial disaster" that prompted the need to delay construction.
WinnDevelopment is partnering with the California Urban Investment Partners -- a joint venture of California Public Employees Retirement System and Johnson/MacFarlane Partners -- on the Columbus Center project.
Eisner, who also works at Regan Communications Group, said other factors were at play, too, citing the fact that the project's estimated cost rose from $350 million to $800 million over the 10-plus years it has taken to get this far.
The rising cost of construction has long been an industry concern and will probably not abate any time soon.
Last month, the Associated General Contractors of America said the producer price indexes for materials used in all types of construction -- as well as such items as diesel fuel -- rose 2.1 percent in March, propelled by a 24 percent increase in diesel fuel costs and as 5.5 percent rise in prices for steel mill products.
"Certainly over the past several years the cost of construction materials has been increasing dramatically because of the global economy," said Robert L. Petrucelli, president and CEO of the Association of General Contractors of Massachusetts, a Wellesley-based trade association. "So when you have a project that starts and stops again, the original price estimates aren't holding, and that's where a project could get into trouble," he said.
He also noted that other projects, mostly in the retail and hospitality sector, have been delayed due to overall economic climate today.
Rushing questioned whether there was adequate transparency on the project's financial details from the start. And he wondered whether the developer early on miscalculated how expensive the project would be.
"The only thing that has happened during this limbo is every time the developer has asked for something we find out something we should have known from the beginning," he said. "And I don't think anything is going to change in the process unless this thing collapses. I think the developer owns too much, he owns all the approvals, all the permitting."
