Finally, a building above the Mass Pike
By Paul McMorrow | OCTOBER 23, 2012
Failure has dogged air-rights development in Boston for so long that any delay in a project slated to rise above the Massachusetts Turnpike has become evidence that building above the highway is a doomed enterprise. The last successful air-rights development, Copley Place, sprang up nearly three decades ago. The deals that have blown up since then have done so spectacularly, giving rise to the notion that Turnpike development is so difficult, and so expensive, that Boston may have already built its last building above the Pike.
Fenway Center should be the project that puts this notion to rest. It hasn’t been able to, because the $450 million mixed-use project slated for a stretch of highway between Beacon Street and Brookline Avenue has been tied up in a brutal court fight with a neighboring property owner. A state appeals court dismissed the lawsuit challenging Fenway Center. That court decision marks the turning point, not just for the Fenway development, but for air rights development in Boston in general.
Fenway Center is the test case for a new way of building above the Turnpike. The state, which controls development rights over the Pike, needs a successful project to show its new approach works. The end of that Fenway Center litigation means the state is about to unlock a new building boom up and down the Turnpike.
The lawsuit that knocked Fenway Center off course was always about money and leverage. The project’s size and prominence — 1.3 million square feet of apartments, offices, and retail sitting across the street from Fenway Park — made it a tempting target for a squeeze play. According to Fenway Center developer John Rosenthal, the lawsuit by the real estate company HRPT Medical Buildings Realty Trust came after Rosenthal refused a request to hand HRPT between $10 million and $12 million in free parking at Fenway Center. Boston Mayor Tom Menino has called the HRPT lawsuit “a stick-up, no question about it.” It took three-and-a-half years for the courts to agree.
The longer the Fenway Center lawsuit dragged on, the more real estate gossip circles had Rosenthal falling victim to the same forces that doomed Columbus Center. Columbus Center held the same promise Fenway Center now does: the chance to use Turnpike air rights to fill in gaping dead spots in a vibrant city. Columbus Center never got the chance to knit the Back Bay to the South End. The $800 million condominium and hotel project ran into stiff neighborhood opposition, faced mammoth cost increases, and eventually collapsed under its own weight. The failure helped reinforce the notion that Turnpike air-rights deals are toxic. Until someone pulls off a Turnpike development deal, Columbus Center will be the measuring stick these endeavors get measured by.
Fenway Center has a couple legs up over Columbus Center. The two projects involve roughly equal volumes of developable square footage, but Fenway Center will be $250 million cheaper, because it has a far smaller footprint over the Turnpike.
However, the real innovation comes with how the buildings that span the Pike get treated. Buildings over the highway rest on a structural deck. Urban land is valuable, but the cost of turning air above the Turnpike into developable space makes the air worthless.
Rosenthal’s project changes the air rights game because it will be the first project to break ground without having to overcome the cost of building a deck over the highway. Rosenthal’s lease with MassDOT erases the decking cost. It will reimburse the developer for building the deck through rent credits, meaning that building over the Turnpike will now cost just as much as building on land does.
In this model, the Turnpike decks act like new subway stations or highway ramps: They’re pieces of infrastructure that unlock private development. The deck doesn’t cost the public anything up front. Because the developer is able to take the cost of building the deck off the top of his state rent bill, the hurdle that dogged Columbus Center — sinking over $200 million into a highway deck up front, before building structures to recoup that investment — won’t affect Fenway Center.
The rent credit allows the developer and the state to both make money. It enables tremendous economic activity to be built on thin air. And Rosenthal’s innovative cost-sharing lease isn’t unique to the Fenway. It can be replicated up and down the Pike. Since it was built, the roadway has been a chasm that divides and deadens the neighborhoods around it; Fenway Center will show that patching over the road doesn’t have to be a once-a-generation undertaking.
