Re: Columbus Center
[size=+2]Turnpike's Development Blunders Boggling[/size]
Banker & Tradesman ? By Columnist Scott Van Voorhis ? June 15, 2009
-----From the folks that gave us the Big Dig, here?s another costly screw up: the $500 million airrights fiasco.
-----That was the Massachusetts Turnpike?s estimate more than a decade ago of what it could reap from the development of the air-rights over the highway?s Boston span, which slices through such real estate hot spots as the Back Bay and Fenway.
-----But pretty much nothing got built, leaving the rest of us across the state to bail out the floundering state authority, drowning in billions in Big Dig debt, with ever-higher tolls.
-----The city of Boston came out of this empty handed as well, losing out on the potential for tens of millions in new taxes from millions of square feet of new air-rights development that never materialized.
All The Wrong Moves
-----The story of what went wrong is a case study in state bureaucratic arrogance and a penchant for making all the wrong real estate moves ? over and over again.
-----But if that were not bad enough, the embattled Turnpike, after laying off its real estate chief and his assistant for good measure, appears determined to pursue a downsized version of its already discredited air-rights development strategy.
-----It?s time to apply a little common sense to this government orchestrated-mess.
-----?There really was no coordinated methodical strategy for these sites,? notes David Begelfer, chief executive of NAIOP Massachusetts. ?It was back-ended. They figured, ?We need money. This is one way to get it.??
-----James Kerasiotes, the Turnpike and Big Dig czar who got dumped in 2000 after, among other things, calling the head of another state agency a ?reptile? in an interview with The Wall Street Journal, was sure one abrasive guy.
-----But one thing Kerasiotes got right was his belief that the air-rights over the highway?s Boston span were a potential gold mine. Now it?s a fair question whether Kerasiotes was padding the numbers here a bit ? the $500 million was based on 14 million square feet of new development.
-----Yet even two thirds of that ? $300 million ? would make a big difference right now.
-----The same is true for all the potential tax revenue that cash-strapped Boston never saw.
-----Just take Columbus Center, local housing developer Arthur Winn?s ill-fated plan to build a condo and hotel high-rise complex on a deck over the Turnpike near the Hancock Tower.
-----That project, which has been delayed for years and may now never happen, has the potential to produce a cool $4 million to $5 million a year in new city taxes. That?s a lot of teachers and firefighters. It?s still a lot even after you subtract for a planned tax break to spur construction.
-----But the Turnpike managed to take what should have been a home run for its own troubled balance sheet and for the city of Boston and run it into the ground.
-----The setbacks have been so thorough as to discredit the idea of air-rights development in a city that boasts a pair of landmark projects built over this very same highway, the Prudential Center and Copley Place.
No One To Take The Call
-----But possibly the Turnpike?s biggest problem has been its unwillingness to devote the kind of attention ? and resources ? needed to oversee the development of millions of square feet of new development.
-----The cash strapped authority, until recently, delegated the brunt of this monumental task to a single real estate executive, his assistant and two other staffers. (The director and his assistant, half the department, were recently let go).
-----Unable to handle this massive workload, the Turnpike?s harried real estate duo were constantly juggling different projects ? and too often making the wrong choices.
-----Back when housing was hot, the state authority strung along an array of developers eager to bid on Turnpike-controlled sites near North Station.
-----Instead, then-Turnpike chief Matt Amorello rolled out a ludicrous plan to build one of Boston?s tallest office towers at South Bay.
Amorello had dreams of netting as much as $200 million for a mix of land- and air-rights parcels near the highway interchange off Kneeland Street by South Station.
-----The lucky bidder, as the Turnpike?s pitch went, would then have a shot at building one of the city?s tallest towers and a new, multibillion-dollar neighborhood.
-----There were a couple tiny little problems with this, though. One was the smokestack bedecked steam plant that overshadows the site. The second was the Turnpike?s insistence of a big, upfront cash payment for a development site that could take years ? or decades ? to build out.
-----Begelfer, the NAIOP Massachusetts chief, remembers trying to talk some sense into the Turnpike crew. He urged the authority to focus on its parcels near North Station where there was lively interest from potential bidders ? to no avail.
-----?Their response was, ?We are doing just fine,?? Begelfer recalls.
-----The Turnpike ended up with just one bidder, a local builder who amazingly had never attempted a major high-rise, let alone a multibillion-dollar mega-development.
Did Someone Say ?Change??
-----Amorello is long gone, of course.
-----And there are even some hopeful signs that change may be on the way.
-----The Patrick administration has just delegated Peter O?Connor, a deputy secretary for real estate and economic development at the Executive Office of Transportation, to help revive the Turnpike?s faltering air-rights.
-----?I agree with you completely,? O?Connor said of my assessment of the Turnpike?s dismal history in the air-rights business. ?The way I put it, you guys have deals papered from the Zakim Bridge to Brighton, but no one has built anything. Clearly, whatever construct you were using didn?t work.?
-----Amen to that.
-----Still, there?s also a danger of history repeating itself as harried state officials like O?Connor are forced to play triage and decide which projects to spend time on, and which to put on the back burner.
-----Just look at the mixed signals being given to a group of deep-pocketed developers, a who?s who of Boston real estate dealmakers, who are lobbying for the chance to bid on a series of air-rights parcels not far from the Hynes Convention Center in the Back Bay.
-----O?Connor says he plans to meet with these developers, who submitted bids in December, and evaluate whether they are still interested. He holds out the option of a six month breather.
-----Maybe it will all work out ? O?Connor has a long background in state and city economic development and it certainly does not hurt to have a fresh set of eyes assessing the air-rights development mess.
-----However, maybe it?s time to take a walk on the wild side here, and remove an embattled and nearly bankrupt state authority from a job that is clearly way over its head.
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