Re: Filene's
Filene?s site has buyers lining up
But developers are counting on a discounted price
By Casey Ross
Globe Staff / October 17, 2010
More than a half-dozen developers, including some of the biggest names in the region, are vying to buy the Filene?s building site in Downtown Crossing, an eyesore that has become one of the hottest properties on the Boston market.
Since the current owner put it up for sale two weeks ago, the property has drawn interest from some major players in the real estate business. Among them: a former owner of the John Hancock Tower, a New York firm that built the Clarendon residences in the Back Bay, and luxury builder Ronald Druker.
The recent rush of interest is the strongest sign yet of a possible turnaround for the boarded-up site. City officials said an array of retailers are considering leasing space there, among them Target, Whole Foods, Au Bon Pain, and Nordstrom Rack, the department store?s discount chain. The district?s longtime magnet, Filene?s Basement, also continues to pursue a return to the location. No deals have been signed.
Meanwhile, several developers are scrambling to devise new building plans that include mul tiple levels of stores and hundreds of apartments.
?It?s an incredible location,?? said Jack Englert, principal of Criterion Development Partners, a Dallas home builder that wants to redevelop the property, which sits above Boston?s busiest transit stop. ?With the rental market strong, and construction pricing still down a bit, it?s hard to imagine a better time to build.??
Several potential buyers said their projects would be smaller than what had been proposed by the site?s current owners, a team led by Vornado Realty Trust and developer John B. Hynes III. They won approval in 2007 for a 39-story tower containing offices, 166 condominiums, stores and restaurants, and a hotel. The project fell apart in the spring of 2008, when the economic downturn decimated demand for new condominiums and offices.
Since June 2008, the Filene?s site has been a blight on Downtown Crossing, with the skeleton of the department store looming over an empty construction crater. Vornado and Hynes began seeking buyers last month after the city moved to revoke its permits, citing a two-year delay in construction. Now, many would-be buyers are talking up possibilities for rental housing and stores, which are seen as most likely to attract funding from lenders.
?Our concept for the site would be to develop a luxury apartment tower with retail on the lower floors,?? said Curtis Kemeny, a principal of Boston Residential, a developer of homes and retail stores that is weighing a bid for the site.
Others who confirmed interest declined to discuss their plans, except to say that the project represents a rare opportunity in the city?s densely packed downtown.
?It?s interesting,?? Druker said of the chance to redevelop the site. He declined to elaborate. Druker owns several nearby properties and has successfully developed large mixed-use projects across the city, including Heritage on the Garden and Atelier 505 in the South End.
Also pursuing the property is Normandy Real Estate Partners, according to two sources with knowledge of the sale process. The firm is coming off a string of real estate successes in the city, including its sale of the Hancock Tower for $930 million to Boston Properties. Normandy bought the signature skyscraper at a 2009 foreclosure auction that valued it at $660 million. It also developed the Ames Hotel near Boston City Hall.
Other interested firms include Houston residential builder The Hanover Co., which has developed luxury housing complexes in cities in California and along the East Coast; and the Related Cos., which developed the recently completed Clarendon condominium complex in the Back Bay and is currently building a 60-story, mixed-use tower in Manhattan.
Even with all the buzz over the Filene?s property, several interested developers said a deal could prove elusive, especially if Vornado and its partners insist on selling the property for anything close to the more than $150 million they have put into it.
Some said it is not worth half that today after a sharp decline in real estate values, putting its value between $60 million and $80 million. Vornado and its partners have not publicly stated an asking price, but two people with knowledge of the sale process said the group is seeking as much as $100 million.
Vornado and Hynes declined to comment for this article.
In order to jump-start construction at Filene?s, a new developer would have to buy the property at a price low enough to justify the cost of building stores and homes that probably will generate less income than was projected for the development before the recession.
Vornado could choose to sell the property outright or unload only part of it; for example, it could seek to retain ownership of the retail portion ? which stands to be the most profitable ? while selling the rights to build apartments and offices. The effort to sell the property will likely take several months and multiple rounds of bidding.
In addition to the economic challenges, any developer would also have to deal with the project?s controversial history. During the past year, Mayor Thomas M. Menino has repeatedly accused Vornado of dragging its feet and subordinating the city?s needs to its desire to turn a profit. Vornado and Hynes have said they tried everything in their power to resume construction on the site and that they could not restart work on a project that would have lost money in the down economy.
Menino?s office did not respond to a request for comment on the renewed interest in the property.
After the city?s move to revoke permits for the development, any new builder would have to get fresh approvals from the city and secure signed deals with new retail tenants. Executives with Cushman & Wakefield, the firm handling the sale for Vornado and Hynes, said retailers are lining up for a chance to open on the historic site, but they would not release any names.
City officials involved in recruiting businesses to Downtown Crossing did identify some retailers with potential interest. Representatives of Target and Whole Foods declined to comment, while a representative of Nordstrom Rack said the retailer has no current plan to open a new store on the site. An executive with Au Bon Pain, which previously operated a store there, said it is interested in returning, but that no deal has been signed.
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