Millennium Tower (Filene's) | 426 Washington Street | Downtown

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Re: Filene's

Is an apartment building going to be put up on the Filene's hole?

From Banker & Tradesman:

"We think that there's enough momentum in the market and interest in that site that something will happen this year," said Thomas Hynes Jr., CEO of Colliers International Boston. "There's very strong demand in the rental market, and the precedent's already set on that spine with residential towers right down the street. Whether it gets sold or whether Vornado stays in some capacity ... something will happen in that location."

My thoughts:

If a rental tower (or two, or three) does go up, it will be interesting to see who the developer selects as its target market. Rich, singles? Dual-income, no kids? New families?

Given its location, putting residential here would benefit the neighborhood, greatly. 45 Province looks better if more people are living in the ?hood. An apartment building has been proposed for up at Bromfield and Washington streets above what is now a Payless shoe store and Wendy?s. With three residential buildings in such close proximity, the area would have quite the different feel.

Hopefully, any new residents would realize they are in the commercial / retail district, not on Beacon Hill, and wouldn?t attempt to drain the business life from the area.

The Archstone Boston Common apartment building seems to be full of people who are content with being in a busy neighborhood.

Targeting new families is an excellent idea although I fear the developer won?t be willing to build apartments large enough for a family with children. There may not be enough of these in the city to make it financially viable. Other cities have done this, however, (Vancouver comes to mind) with great success.

They should also consider putting grad-student housing inside, similar to what was done at Trilogy, in the Longwood / Fenway area. Harvard was co-developer (if I?m not mistaken) and put up cash in order to get it built. In return, they have dibs on a significant number of apartments in the building. And, if I?m not mistaken, the grad students have their own entrance.

So, they should build three towers: one for singles / urban professionals (one to two bedrooms, small kitchens); one for new families (two or three bedrooms, with the second bedroom large enough for a 6-10 year old child and the third large enough for a crib (or a nanny!); and one for grad students (studios or small one-bedrooms, kitchenettes, even shared spaces).

The first three floors should include dedicated parking, a BSC gym / fitness facility, Trader Joe?s, Mexican-American take-out (I think Chipotle was there before?), Filene?s Basement (since Vornado ?promised them? to put it back), entrance to the Orange / Red Line, and perhaps office space on level 2/3? Maybe even a (gasp!) bookstore?

http://www.bostoncondoblog.com/
 
Re: Filene's

The DTX location of Filene's Basement has been cut completely. It will sadly never come back.
 
Re: Filene's

Why? I don't see why an apartment development would preclude a retail use in the basement.
 
Re: Filene's

Why? I don't see why an apartment development would preclude a retail use in the basement.

Oh, there's no doubt the space would still be ideal, its just that the company killed off all interests in keeping one in DTX. The company has bankrupted multiple times and now the focus is on Newbury/Boylston.

Edit: This decision came during the failed Vornado era. The company could not afford to keep interest in that site if it was only going to be a huge hole.
 
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Re: Filene's

IS VORNADO REALTY TRUST PLAYING THE WAITING GAME AT DOWNTOWN CROSSING?
MAY 10, 2011 9:17 AM, BY ELAINE MISONZHNIK, RETAIL TRAFFIC ASSOCIATE EDITOR


New construction projects ranked high on the list of casualties during the recent downturn. Some developers postponed building new centers because they were fearful that returns on investment would fall short of expectations. Others found they couldn?t get financing, or had the misfortune of seeing previous commitments scrapped because of lender bankruptcies.

Now, with conditions in the commercial real estate sector on the upswing, some of those projects have started to break ground. In one high-profile case, however, a developer may be stalling on a planned project to maximize its returns and using the still challenging financing environment to its advantage.

When Vornado Realty Trust, a New York City-based diversified REIT, stopped work in 2008 on One Franklin Street, its $700 million, 1.2-million-square-foot mixed-use project in downtown Boston, it cited the grim economic outlook and difficulty in securing financing as reasons. Three years later, with no date set for construction to resume, Vornado claims it wants to sell out.

Yet given the economics of the deal, selling the property doesn?t quite make sense. Vornado would have trouble recouping its losses on the land today, but if it builds the project at a later date it will likely reap hefty returns, according to Dan Fasulo, managing director with Real Capital Analytics (RCA), a New York City-based research firm that tracks commercial real estate investment.

?I don?t think they are going to sell it,? says Fasulo. ?I think they?ll wind up sitting with this, or maybe they can find a cheaper source of capital to partner up with ? maybe an institutional or foreign investor. Basically, what Vornado is saying is they don?t want to build now. They are going to wait until a new development on that site is a home run.?

Hindsight is 20/20

When Vornado bought the 656,000-square-foot Filene?s Basement building in downtown Boston from Federated Department Stores for $100 million in the summer of 2006, the commercial real estate market was booming.

Vornado formed a 50/50 joint venture with Gale International, a New York-based privately held development and investment firm, and quickly drew up plans to redevelop the property into a 1.2-million-square-foot mixed-use project combining retail, office, luxury condos and a hotel. JP Morgan and Mack-Cali Realty Corp. also invested in the development.

Renamed One Franklin Street, it was to contain 297,000 square feet of retail, 500,000 square feet of office space and 136 condos, in addition to a 225,000-square-foot hotel component and a below-grade parking garage.

Located in the midst of Boston?s Downtown Crossing shopping district, within easy access to public transportation, the site fit all the requirements for a successful mixed-use development, says Richard K. Green, director of the Lusk Center for Real Estate at the University of Southern California and professor in the School of Policy, Planning and Development at the Marshall School of Business.

Vornado and partners began demolishing existing structures on the site in February 2008. One Franklin Street was due to be completed in 2011. Vornado initially planned to finance construction with a $546 million CMBS loan leveraged at about 70 percent, but could not find lenders willing to commit to such a large sum.

Yet it eventually secured a $360 million deal for a four-year construction loan financed primarily by the Bank of Ireland and Bank of America, with Helaba Bank, HBOS and Capital One taking smaller positions. The loan was scheduled to close on Nov. 15, 2008, but the deal never went through.

After Vornado halted demolition work on the site, media reports said the project?s financing fell through, but stories from Commercial Mortgage Alert, an industry newsletter tracking the CMBS market, show that wasn?t the case.

The banks were still willing to fund the project. Vornado, however, worried there was no longer enough demand from retailers, office tenants and condo buyers to justify building the complex ? at least not in the near term.

Controversial decision

The hitch was that while Vornado and its partners felt it was prudent to halt construction and wait for market conditions to improve, One Franklin Street was no ordinary project.

The 89,000-square-foot site happens to be part of the Downtown Crossing revitalization effort, a pet project of Boston Mayor Thomas M. Menino, according to Jonathan Lapat, principal with Framingham, Mass.-based brokerage firm Strategic Retail Advisors and partner with Boston X Team International, an international alliance of retail real estate brokers.

One Franklin Street is located within the Downtown Crossing Business Improvement District (BID). In order to build it, Vornado and Gale had to receive permission from the Boston Redevelopment Authority (BRA) and other city agencies.

As long as the Mayor and BRA officials believed the project was halted due to financing issues and low demand, they seemed to be willing to wait for better times for construction to resume. And then Steven Roth, Vornado chairman, committed a costly faux pas.

Speaking before an audience at Columbia University in March 2010, Roth implied that he let the former Alexander?s site in midtown Manhattan sit unused for years in order to get development incentives from the City of New York.

Vornado eventually built the Bloomberg Tower, a 1.3-million-square-foot mixed-use complex, on the land. The site remained empty for nine years after Alexander?s Department Store closed its doors, before Vornado started construction in 2001.

The speech gave rise to suspicion among Boston city officials that Vornado was deliberately stalling on One Franklin Street as well. On March 8, 2010, Mayor Menino sent Roth an angry letter, chastising him for his cavalier attitude toward creating urban blight. He also directed the BRA to look into the possibility of using eminent domain to take back the land from Vornado.

Vornado officials insisted the project was postponed because of the credit crunch and the recession. By November, with no construction date set, the BRA revoked Vornado?s authority to redevelop the site.

Officials with Vornado declined to comment, referring all questions to its annual report. The BRA and Mayor Menino?s office did not return calls for comment.

Truth or dare

Vornado claims that it wants to sell One Franklin Tower to another developer or find a new joint venture partner to finance it. In his letter to shareholders this April, Roth indicated that the firm already wrote off $36 million in development costs on the project, with $46 million remaining on its books. Vornado has secured the services of commercial brokerage firm Cushman & Wakefield to help it find a buyer.

In his letter, Roth also pointed out that the firm has received significant interest in the site. Still, the chances of Vornado recouping its $100 million investment under current market conditions are low given scarce demand for undeveloped land, according to Fasulo.

Instead, both he and Green suspect that Vornado is biding time until there is strong enough demand for new space in Boston for it to build and hit its original return targets. If the firm wanted to secure new financing for the project, it could probably find a willing foreign investor, Fasulo says.

After all, it?s a publicly traded REIT with an excellent development record and a high-profile site in a major U.S. city. It could also build a project that features primarily retail and rental apartments ? the two sectors that have come back the strongest in Boston in recent months.

This year, the retail vacancy rate in Boston is expected to drop 40 basis points to 6.4 percent, according to Marcus & Millichap Real Estate Investment Services, an Encino, Calif.-based real estate firm. The vacancy rate for apartments across the Boston metro area will likely drop 90 basis points to 4.2 percent ? lower than pre-recession levels.

The vacancy rate for office properties in Boston, however, will still average approximately 13.3 percent in 2011, Marcus & Millichap projects.

Vornado might need the profits from the condo and office components to make its numbers work. ?Developers are in business to make money. It?s not particularly shocking that Vornado wants to get the best return it can on its investment,? says Green.

?I think it?s a great mixed-use site,? continues Green, ?but it probably is not yet time to build on it. If I were a developer, would I start breaking ground right now? Probably not.?

Green also believes that it would be a mistake for Boston city officials to take the project back through eminent domain in order to redevelop it themselves. Cities have a history of spending too much money on construction compared with private developers, and they often get things wrong, he points out.

Vornado, on the other hand, has decades of development experience behind it, so it may make sense for the city to wait until it?s ready to start work on One Franklin Street once again.

?I think it has a great chance of getting built,? says Lapat. ?It?s a phenomenal location and a neighborhood that has been going through a slow, but consistent, revitalization over the years. It would surprise me greatly if it doesn?t get built once the market corrects itself.?

The price of Vornado stock (NYSE: VNO) closed at $9479 per share on Monday, May 9, up from $81.88 a year ago.

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Re: Filene's

The article was fine until this came up:

?I think it?s a great mixed-use site,? continues Green, ?but it probably is not yet time to build on it. If I were a developer, would I start breaking ground right now? Probably not.?

Wtf? A giant hole is better than (re)starting construction?? By the time the thing is finished, the economy will be even better.

Sloppy reporting also annoys the hell out of me like calling it the Filene's Basement building. No, it's the Filene's building, get it right.
 
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I love that typo where they stated VNO's share jumped from $81 to OVER 9000!
 
Re: Filene's

Buying time

Bidders are ready to purchase the former Filene?s site, but its owners are reluctant to sell at a big loss ? and not very communicative with City Hall
By Casey Ross
Globe Staff / June 8, 2011

Months after it was put up for sale, the former Filene?s property in Downtown Crossing still faces an uncertain fate as its New York owner refuses to unload it to bidders offering only a fraction of the $200 million spent on the marquee building.

Real estate brokers following the sale said many of the bids are about $50 million, a sum that would require Vornado Realty Trust and its partners to accept heavy losses.

While several bidders are contemplating new offers, the process of evaluating them is complex because interested parties are trying to purchase different parts of the property. Some have only expressed interest in renovating the original Filene?s department store, while others have said they want the rights to build a tower. And still others have proposed buying the entire site and developing a project with residences and stores.

As Vornado sorts through its options, City Hall officials are concerned about the lack of information about the process they have received. A Boston Redevelopment Authority spokeswoman said executives with Vornado have not provided any updates on the sale in months.

?We have been talking with other people interested in the property, but nothing has materialized,?? spokeswoman Susan Elsbree said. ?We?re a long way from the goal line.??

Among the bidders still interested is Ronald Druker, a luxury property builder who has scored successes in recent years on other complex mixed-use projects such as Atelier 505 in the South End. He would not give details about his communication with Vornado, but emphasized the site must be redeveloped to revitalize the Downtown Crossing shopping district. Druker owns the Corner Mall, which is across the street from the former Filene?s site.

?It?s really important that something happen at that location, whether we?re involved or not,? he said.

Vornado put the property up for sale in late 2010 after the city revoked its permits for a $700 million tower with offices, residences, retail stores, and a hotel. The firm halted construction on the site in the summer of 2008 after it lost its financing during the economic downturn and resulting global credit crisis.

A spokeswoman for Vornado declined comment. Its partners on the project are JPMorgan Chase & Co. and Mack-Cali Realty Corp. Representatives of those firms also declined to comment.

Real estate executives said Vornado may be reevaluating its decision to sell after the initial rounds of bidding.

The firm could still decide to develop the property itself, a prospect that might look more appealing as the economy begins to improve.

?I don?t think they went into this thinking that they would sell at a fire sale price,?? said David Begelfer, chief executive of NAIOP Massachusetts, a commercial real estate association. ?They?re clearly not just going to walk away and lose money when they have control of a very valuable piece of property.??

Others said they expect to see the project move forward soon, whether with Vornado or another developer.

?My bet is that you?ll see construction begin there by the end of the year,?? said Thomas J. Hynes Jr. , chief executive of Colliers International. ?It?s really more a matter of the price and the terms, but it?s too good a site to sit there.?? One of the principals on the project is his nephew, John B. Hynes III, who has actively been trying sell it.

The city remains a wild card in Vornado?s effort to make progress.

The Boston Redevelopment Authority would have to approve any new proposal brought forward by Vornado or any other developer. Mayor Thomas M. Menino, who has considerable influence over the development process, has publicly chastised Vornado for failing to move forward and said he will not allow the firm to profit from its real estate interests in Boston after it allowed Filene?s to become blighted.

City officials have said several retailers have expressed interest in the site, including Target, Whole Foods, Au Bon Pain, and Nordstrom Rack, the department chain?s discount outlet. Filene?s Basement has also said it wants to re-open on the property.

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Re: Filene's

Construction beginning by the end of the year? What planet is that guy living on? It took 3 years to design One Franklin with all the approvals and committee's that had to be appeased. Unless they're using the same set of docs (which I doubt), a prospective owner is going to have to start all over again. Minimum 3 years.
 
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Laws, taxes, morals, and ethics are all concerns for the little people not Ron Druker.
 
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Wow, I can't believe that Filene's Basement is still interested after all of this BS. The company is nothing like it once was and they were ROYALLY screwed by this mess. You could even extend the blame for the bankruptcy on the decimation of their flagship store. It is sad and pathetic that we lost Filene's Basement, a Boston tradition, to NYC (with their multi-story flagship there).

...and I'm not satisfied with Nordstrom Rack. A real multi-level Nordstrom needs to go in there. DTX would be nearly instantly revitalized.
 
Re: Filene's

Wow, I can't believe that Filene's Basement is still interested after all of this BS. The company is nothing like it once was and they were ROYALLY screwed by this mess. You could even extend the blame for the bankruptcy on the decimation of their flagship store. It is sad and pathetic that we lost Filene's Basement, a Boston tradition, to NYC (with their multi-story flagship there).

...and I'm not satisfied with Nordstrom Rack. A real multi-level Nordstrom needs to go in there. DTX would be nearly instantly revitalized.

Royally screwed? They were a company on the verge of bankrupcy and, because of politics, were going to get a top-dollar store fit-out for FREE in a prime location and a super cut-rate rent for 20 years. FB couldn't afford the renovations that were necessary to their asbestos and water laden rattrap. The developers might be smarmy, but, where FB is concerned it was THEY that were getting screwed. All so Hizzoner could show off how "HE" saved FB in it's old spot.
 
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Royally screwed? They were a company on the verge of bankrupcy and, because of politics, were going to get a top-dollar store fit-out for FREE in a prime location and a super cut-rate rent for 20 years. FB couldn't afford the renovations that were necessary to their asbestos and water laden rattrap. The developers might be smarmy, but, where FB is concerned it was THEY that were getting screwed. All so Hizzoner could show off how "HE" saved FB in it's old spot.

But FB didn't actually bust until 2009. The DTX location was closed in 2007 and severed a major part of company's business right as the economic crisis hit. Of all the times of the past, this would be the prime time when people would be looking for bargains to save money and avoid paying retail at Macy*s across the street.
 
Re: Filene's

But FB didn't actually bust until 2009. The DTX location was closed in 2007 and severed a major part of company's business right as the economic crisis hit. Of all the times of the past, this would be the prime time when people would be looking for bargains to save money and avoid paying retail at Macy*s across the street.

You're not getting this. FB was already SO tightly strapped that they wouldn't have been able to afford to stay in that location even if the One Franklin project had never been started. The store was badly overdue for a refit and FB as a national company had no money to do it. The DTX store wasn't a make or break for that company. Their problems extended over their entire national chain of over 100 stores. They were already exploring moving to another location before Vornado bought the property. I know we like to blame the big, bad developer for everything but in the case of FB, they were in the process of killing themselves long before Vornado came along. One Franklin would have artificially propped up their DTX presence for a bit longer.
Imagine if One Franklin had been completed and FB had gotten their fancy new space, at the developers expense, and still gone under? There isn't another retailer in this country that will take a subterranean space with NO visibility. Vornado would have been stuck with it.
 
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Agreed. Why couldn't they have gone on forever in that space, unrenovated?
 
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Arch, I completely understand what you are saying and a lot of my frustration comes from the way the company itself expanded irresponsibly, but I did not know that FB was actively seeking an alternate location before the One Franklin proposal. I would like some insight on this, please. Even if they weren't, the company should have kept focus on its internationally-famous and highly-profitable flagship store and not have opened a hundred stores in strip malls in places like New Jersey. With all the money they spent to open those shiny new stores, they could have renovated their flagship store if they even wanted to. I also agree with Statler and Ron though, FB could have thrived forever in that dingy basement.
 
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