Columbus Center: RIP | Back Bay

[pelhamhall]

Re: Columbus Center

The inherent paradox that Ned continues to perpetuate is that the project is somehow going to be very, very profitable and should not need public subsidy, but at the same time he proffers the argument that the project is so inherently risky that it is not financeable by anyone. This argument is sure to baffle anybody in the commercial real estate finance world.

Besides - any finance/cost agreement made prior to the construction cost boom of the mid-2000s is moot at this point. All the financial models were initially made with construction costs numbers that simply do not exist now. All of us in construction/finance know this. It's not even hard to grasp. It's a wildly different financial landscape that when this was proposed and approved.

Times change, why is that so hard to grasp? The promises made so many years ago don't amount to promises broken - they amount to the advent of new realities. It doesn't mean the developer is malicious or pulling a bait and switch. This is all so, so basic and rudimentary.

 

[KentXie]

Re: Columbus Center

Neither the buildings above nor the tunnels below are complicated; there are successful examples of each that developers can imitate.

Name one single successful project IN Boston that was built on an air right over a busy highway besides the Prudential Center which by the way, did not need to abide with the huge controversies that CC is going through. I can name two that failed so far or are taking just as long. Gateway Center and the 50 story tower in Boylston Street.

Really, not complicated? Please Ned stop being in denial. Decking over the Pike requires more money and material and closing lanes or redirecting traffic during day and night. The fact that CC is required as you say to clean the pollute air is already more complicated than other projects already. You're acting as though all projects in Boston goes through the same thing. You're arguments are littered with conflicting points.

 

[Ron Newman]

Re: Columbus Center

Copley Place, but I have no idea what controversies it caused, if any.

 

[stellarfun]

Re: Columbus Center

As I have neither the time, diligence, or frankly the interest, to peruse thousands of pages of contract and lease documents, I wonder if Ned might provide the breakout of the $1,146,096,618.00 in total revenue for this project that the developers apparently have included in certain documents filed with the state.

Over what period of time is this revenue received, and is this gross revenue, or net revenue (e.g., gross revenue minus rent payments)?

How much of the revenue is from sale of condos, how much from lease of commercial space, how much from the parking garages, how much from various fees or assessments (e.g., condo fees)?

 

[TedG]

Re: Columbus Center

Times change, why is that so hard to grasp? The promises made so many years ago don't amount to promises broken - they amount to the advent of new realities. It doesn't mean the developer is malicious or pulling a bait and switch. This is all so, so basic and rudimentary.[/QUOTE

True, times change, but that does not apply here.
These developers went looking for public subsidies immediately after the public hearings were over and they got their approvals on a subsidy-free basis. No time had elapsed. This is not an example of changing times, but an example of a developer lying to everyone from the very beginning.

 

[pelhamhall]

Re: Columbus Center

No, that is simply not true. The time from when the original financial models were crafted to when they asked for public subsidy was many years. Check the timeline. I hate cheer-leading for this project so adamantly, but I cannot believe the wave of misinformation that is being sent out - opinions are opinions, but let's try to keep the facts straight.

 

[Ned Flaherty]

Re: Columbus Center

"California?s Columbus Center" I'm curious about the incessant repetition of the word "California" in your posts about Columbus Center. We're all aware that CalPERS was intimately involved in the financing of this project, but the tone and repetition seems to reference something else. Do you bear some animosity against the Golden State or its public administration? Just curious...

Hello, Beton Brut.

It isn?t quite true that ?we?re all aware.? None of the journalists or Commonwealth officials I talked to had ever read the California-Winn contract dated 15 March 2006, and their questions show that many people are only now starting to realize the full extent of California?s controlling role. Among the forum members that do now understand this, it may be correct to say ?we?re all aware?; but there still are forum posters and visiting readers who aren?t aware.

Referring to projects by owner name is common; e..g, ?Prudential Center?, ?Fleet Center?, ?TD Banknorth Garden?, and others who now say ?California?s Columbus Center? are finding that those who already understand what that means don?t mind the term, and those who don?t understand are grateful to learn what it means.

I have no animosity at all toward California, where I used to live. But residents of both states would have been better served if California had investigated the Winn Development prospectus a lot more before they bought the project. But they failed to do that.

Right after signing the lease over two years ago, California defaulted, and then demanded looser terms, lower rent, and larger subsidies. Such critical problems should have been discovered beforehand, not after the fact. Now they?re stuck.

 

[Ned Flaherty]

Re: Columbus Center

. . . This makes no sense. How can un-sellable condo's make a profit of $346,096,618?

Your question ? comparing potential profit versus actual saleability ? is exactly my point. The potential profit that California claimed in subsidy loan applications can?t occur because the extraordinary insurance, financial, and legal liabilities render the homes un-sellable, or at least force them to sell at far lower prices.

Why? Massachusetts officials and California?s Boston representatives admitted that the liabilities exist, and are major, and are unique, and that no one knows the dollar impact. But here?s a hint: California and MTA agreed in February 2008 that the new tunnels now cost up to $285 million (the amount of the two tunnel guarantees favoring MTA). The next month, Hynes Convention Center discovered it now has to repair/replace its 46-year old tunnels, at its own expense.

Condominium owners at Columbus Center are subject to equivalent liabilities. Sharing a $285 million expense among only 443 owners makes for an unusual burden of $643,000 apiece. Remember that the 99-year lease requires the first buyers to start saving for the new tunnels on day one. No broker can sell that as a ?feature.?

 

[TedG]

Re: Columbus Center

No, that is simply not true. The time from when the original financial models were crafted to when they asked for public subsidy was many years. Check the timeline. I hate cheer-leading for this project so adamantly, but I cannot believe the wave of misinformation that is being sent out - opinions are opinions, but let's try to keep the facts straight.

The facts, pelhamhall, are that the developers, in the public meetings and in the proposal itself, repeatedly promised that no public subsidies would be needed and that the project would be 100% privately financed. These same developers were then quoted in the newspapers (after they got caught) saying it was their intention from the very beginning to seek public money.

Let's call this exactly what it is, okay?

 

[Ned Flaherty]

Re: Columbus Center

The inherent paradox that Ned continues to perpetuate is that the project is somehow going to be very, very profitable and should not need public subsidy, but at the same time he proffers the argument that the project is so inherently risky that it is not finance-able by anyone

No, Pelhamhall, I?m not perpetuating any paradox. I?m only reporting it. The paradox arises from statements made and confirmed by the owners:

● California?s latest Massachusetts subsidy applications from 2007 show high revenue and profit.
● No bank has ever loaned even one dollar to this project. California claimed in multiple Massachusetts subsidy applications that Anglo Irish Bank was already financing the project. In fact, however, that bank?s offer ran for only four months starting in early 2006, and included a 19-page list of requirements that the project never met. That tentative offer expired, and was never renewed, revised, or replaced.

. . . any finance/cost agreement made prior to the construction cost boom of the mid-2000s is moot at this point . . .

Cost estimates can change over time, but that never makes a written proposal moot. The project was proposed in writing, without any qualification such as ?we get to change whatever we want later on.? The proposal was approved based on its promises. Just because it?s now been found invalid, impossible, or dishonest does not mean that the promises used to gain approval don?t exist. The reason that proposals are required in the first place is to ensure that the commitments they contain to get approval can be enforced.

The promises made so many years ago don't amount to promises broken - they amount to the advent of new realities. It doesn't mean the developer is malicious or pulling a bait and switch.

Just after he approved this proposal, BRA Director Mark Maloney publicly announced that a promise made ? but not kept ? is a promise broken. To back up his own words, he created a new position, and hired what he called the ?official BRA Promise Keeper? to ensure that promises made to get approvals don?t get broken later.

The project is now in its 13th year of being re-proposed. Anyone who claims that ?new realities? now invalidate prior promises is pulling a bait-and-switch. This qualifies as a textbook example of that kind of fraud, especially after the owners? later admission: ?From the get-go, public support was always built into this project,? said Alan Eisner, a Winn spokesman.? (See ?Columbus Center wins tax credits worth millions?, Boston Globe, 30 June 2006.)

 

[underground]

Re: Columbus Center

Cost estimates can change over time, but that never makes a written proposal moot. The project was proposed in writing, without any qualification such as ?we get to change whatever we want later on.? The proposal was approved based on its promises. Just because it?s now been found invalid, impossible, or dishonest does not mean that the promises used to gain approval don?t exist. The reason that proposals are required in the first place is to ensure that the commitments they contain to get approval can be enforced.

If this were true, all projects would have to be completed the day they were proposed.

 

[Ned Flaherty]

Re: Columbus Center

. . . I have neither the time, diligence, or frankly the interest, to peruse thousands of pages of contract and lease documents . . . I wonder if Ned might provide the breakout of the $1,146,096,618.00 in total revenue for this project that the developers apparently have included in certain documents filed with the state. Over what period of time is this revenue received, and is this gross revenue, or net revenue (e.g., gross revenue minus rent payments)? How much of the revenue is from sale of condos, how much from lease of commercial space, how much from the parking garages, how much from various fees or assessments (e.g., condo fees)?

California filed multiple Massachusetts subsidy applications during 2007. Taken together, they reflect the following gross revenue from selling the hotel, parking, and condominiums as soon as possible upon completion. Condominium fees are never treated as developer revenue, so they are excluded here. Rent is re-paid partly by the developer, but mostly by future condominium owners.

$0,079,500,000 - Hotel, retail, and 284 parking rentals (Exhibit 1*)
$0,058,400,000 - Parking sales: 633 spaces ? $92,259 each (Exhibit 2*)
$0,004,673,625 - Affordable units: 22 ? $180,000 each (Exhibit 3*)
$0,005,712,208 - Affordable units: 22 ? $220,000 each (Exhibit 3*)
$0,997,810,785 - Market-rate condominium sales: 399 ? average $2,118,930 each (Exhibit 3*)
$1,146,096,618 - total revenue
$0,800,000,000 - total cost
$0,346,096,618 - gross profit

Exhibit 1: Bank Loan Commitment Letter (Anglo Irish Bank, 10 May 2006).
Exhibit 2: Property tax waiver subsidy request (CWCC, 05 May 2006).
Exhibit 3: MHFA Loan Application 06-002 (CWCC, 12 December 2006). Condominium prices are appreciated at 2.8%/annum through 2012, the first sale year.

 

[fenway12]

Re: Columbus Center

Your question ? comparing potential profit versus actual saleability ? is exactly my point. The potential profit that California claimed in subsidy loan applications can?t occur because the extraordinary insurance, financial, and legal liabilities render the homes un-sellable, or at least force them to sell at far lower prices.

Why? Massachusetts officials and California?s Boston representatives admitted that the liabilities exist, and are major, and are unique, and that no one knows the dollar impact. But here?s a hint: California and MTA agreed in February 2008 that the new tunnels now cost up to $285 million (the amount of the two tunnel guarantees favoring MTA). The next month, Hynes Convention Center discovered it now has to repair/replace its 46-year old tunnels, at its own expense.

Condominium owners at Columbus Center are subject to equivalent liabilities. Sharing a $285 million expense among only 443 owners makes for an unusual burden of $643,000 apiece. Remember that the 99-year lease requires the first buyers to start saving for the new tunnels on day one. No broker can sell that as a ?feature.?

I agree with you that these condo's will sell at a big discount compared to The Clarendon and 285 Columbus. Have the developers ever considered building apartments instead of Condo's? This way the company that owns the building will be liable for the tunnels and not the condo association.

Also, why don't the developers partner with a large hotel chain to fund the hotel portion of the project? This is a great location for a hotel I'm sure there is a few companies that could easily fund it.

 

[Ned Flaherty]

Re: Columbus Center

. . . The time from when the original financial models were crafted to when they asked for public subsidy was many years.

That?s untrue. The time between the financial models in the proposal and the subsidy requests was not ?many years.? As soon as all zoning challenges to the approved proposal were completed, the subsidy requests started pouring in. Here are the dates.

10 July 2003 - Columbus Center?s 1,331-page written proposal dated 15 May 2003 was approved, based on 18 financial chapters totaling 510 pages. That proposal repeated the promise made throughout years of public hearings: that the project was 100% privately owned, operated, and funded, with no public subsidies, ever. The Boston Globe confirmed that promise the next day.

10 September 2004 - Owners confirmed that ?construction costs move with the economy? (?Costs drag down high-rise plans?, Boston Herald). The owners explained that because cost changes are accompanied by similar changes in revenue and profit, that principle would keep their approved proposal viable throughout all economic cycles.

2005
12 August 2005 - Owners requested $60 million in federal tax credits.
Fall, 2005 - Owners requested $27 million in property tax waivers.
8 November 2005 - Owners requested a $4.3 million state grant.
22 December 2005 - Owners requested a $15 million state loan.
22 December 2005 - Owners requested $2 million in 2 state grants.

2006
22 February 2006 - Owners requested a $28 million property discount.
27 May 2006 - Owners requested $3.5 million in 3 federal tax credits.
23 June 2006 - Owners requested a $7.5 million state income tax waiver.
25 August 2006 - Owners demanded looser terms, lower rent, and larger subsidies.
October 2006 - Owners requested a $5.6 million state loan.

2007
March 2007 - Owners again requested $60 million in federal tax credits.
11 July 2007 - Owners requested a $35 million tax-free bond loan.
1 May 2007 - Owners requested $20 million in 2 state grants.

See each individual subsidy request for details.

 

[Ned Flaherty]

Re: Columbus Center

If this were true, all projects would have to be completed the day they were proposed.

Don?t be silly. No one ever proposed to complete a project instantly, and no agency would ever approve a project that made such a claim. Read some professional proposals, and you?ll find that every one includes a calendar for reviews, funding, construction, and sales.

Every major calendar proposed by Columbus Center over the last 13 years has been missed. All the calendars were chosen by the developers. They have only themselves to blame for not meeting dates of their own choosing.

 

[Ned Flaherty]

Re: Columbus Center

Have the developers ever considered building apartments instead of Condo's? This way the company that owns the building will be liable for the tunnels and not the condo association.

The developers said they considered apartment rentals instead of owned homes, and said they decided against it because that would place even greater financial strains on the project.

Also, why don't the developers partner with a large hotel chain to fund the hotel portion of the project? This is a great location for a hotel I'm sure there is a few companies that could easily fund it.

The developers said they found that hotel chains don?t participate in speculative real estate developments, and hotels only start to get interested once construction is nearing completion. The few hotel chains that are able to fund hotel construction projects build their own hotels, instead of hotels that are condominiums within other people?s projects.

 

[underground]

Re: Columbus Center

Don?t be silly. No one ever proposed to complete a project instantly, and no agency would ever approve a project that made such a claim. Read some professional proposals, and you?ll find that every one includes a calendar for reviews, funding, construction, and sales.

Every major calendar proposed by Columbus Center over the last 13 years has been missed. All the calendars were chosen by the developers. They have only themselves to blame for not meeting dates of their own choosing.

What does this response have to do with my comment? Proposals have calendars? No way!

 

[Ned Flaherty]

Re: Columbus Center

What does this response have to do with my comment?

You wrote, ?all projects would have to be completed the day they were proposed.? That?s untrue. Projects are only expected to be completed according to the calendars that their developers propose.

Proposals have calendars? No way!

That?s also untrue.

The numerous design proposals and subsidy proposals for this project contain many calendars which the owners chose for themselves, and then promised to government. Shown below ? taken from many of those calendars ? are completion dates that the developers promised in their design proposals and subsidy proposals over the last 4 years.

The 2-year delay confirmed in March 2008 now sets the 5-year construction at March 2010 - March 2015. Consequently, all ten of these dates are now officially missed.

COMPLETION DATE ● SOURCE and DATE PROMISED
31 December 2004 ● Project Notification Form, 9 March 2001
By 31 March 2007 ● Draft Impact Report, 21 November 2002
By 30 June 2007 ● C.D.A. grant application, 22 December 2005
By 31 December 2007 ● Final Impact Report, 15 May 2003
By 31 December 2009 ● Construction Management Plan, 26 April 2006
By 32 January 2010 ● M.O.R.E. grant application, 2 August 2007
By 2 September 2010 ● MTA 99-year Lease, 2 May 2006
By 31 December 2010 ● tax-free bond loan application, 13 June 2007
By 31 December 2011 ● city property tax and state income tax waiver request, 21 April 2006
By 31 December 2012 ● MTA 99-year lease amendment, 29 February 2008

 

[sidewalks]

Re: Columbus Center

It was so nice and quiet here for a couple of weeks...this is a maddeningly futile discussion. Why don't we discuss, How many angels can dance on the head of a pin?

 

[pelhamhall]

Re: Columbus Center

Simply put, there is no evidence of a grand conspiracy to steal government money while fatcat developers wallow in hordes of cash. It's so silly, it's so laughable and it's so awkward that the only people perpetuating these 100% false accusations are people who live next door to the project.

All the credible newspapers and media outlets in this town have sifted through the same documents that Ned has and found nothing. Nothing. There is no controversy, in fact, there is widespread support of the project. Sure, the state grants are controversial - but the project itself is widely supported.

The huge, risky project has found itself unfinanceable due to 1) the massive explosion of construction costs in 2003-2004 and 2) due to the credit crunch of 2007-2008.

Duh.

Sorry, but there is no other story to tell here. This is the new reality of life in 2008.

So viva Columbus Center and another 8 years of heavy construction in and around the Bryant, Clarendon, 285 Lofts, and Columbus Center - a true city warzone!!! And fantastic news for the economic development of the city.

You couldn't pay me enough to live there through the construction noise and disruption to come though! Yikes. I'd move