Menino wants assurances from developers
Mayor seeks new rule after financial tie-ups
By Casey Ross, Globe Staff | August 21, 2008
Boston Mayor Thomas M. Menino wants to require developers of large projects to obtain financing before they win permission to dig up the city.
His call follows financial problems for two high-profile developments that have already begun construction in Boston: the $650 million redevelopment of the Filene's building in Downtown Crossing and the $800 million Columbus Center complex over the Massachusetts Turnpike.
Menino is having city planners devise a regulation that would delay approvals for developers who cannot show adequate financial backing to proceed with construction. The regulation is an attempt to prevent city streets from being at the mercy of credit markets that can suddenly stall or upend projects.
"We already have two or three holes in our landscape; we don't want any more," said Menino. "We don't want to stifle development, but we don't want developers to take advantage of the city."
The mayor spoke yesterday after the Globe reported that the developers of the 38-story commercial and residential tower on the former Filene's property have been unable to raise financing because credit markets have severely tightened in the wake of the subprime mortgage debacle.
The project is the cornerstone of Menino's effort to remake Downtown Crossing into a destination shopping district in the heart of the city. Almost a year after receiving city permits, the developers have only begun to excavate a portion of the site for its new foundation.
Menino and officials at the Boston Redevelopment Authority said they have been working on the policy for several days and that they were not spurred to action solely by Filene's or any other development. A draft of the regulation indicates that $12 billion in projects are currently under development in the city, and points out that many neighborhoods might have to put up with abandoned or vacant construction sites if tight credit markets continue to delay construction.
An executive with a leading development group said the mayor's regulation is unworkable and would have a chilling effect on future projects.
"It will become a barrier to development. The market just doesn't work that way," said David Begelfer, Massachusetts director of the National Association of Industrial and Office Properties. "To react this way because of the current abnormality in the credit market, I don't think is very prudent."
Other individual developers, including those for the Filene's and Columbus Center projects, declined to comment.
Lenders have been wary of making commercial real estate loans since the subprime mortgage crisis erupted last summer and caused heavy losses at investment banks and other financing firms.
The team trying to build the Columbus Center halted construction on the giant mixed-used complex this year after developers lost some of their private financing as well as some state subsidies.
The draft of Menino's regulation indicates that developers would have to show proof of financing within 18 months of city approval in order to move forward with construction. If they fail to do so, they would have to ask the city for an extension of their permits.
The Filene's project received its city approval in August 2007, while the Columbus Center project was approved in July 2003.
To take effect, the regulation needs the BRA board's approval.
The mayor said the policy would also help the city control the practice of "flipping," in which developers get approval for a project, carry out demolition and other site work, and then sell it for a profit.
"Too many times developers come in, get approvals, sit on it and make all the money off the city," Menino said. "It's an issue we have to get a hold of."
Casey Ross can be reached at
cross@globe.com.
