Suffolk 83
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Re: Filene's
There's a video inbedded in the link.
http://link.brightcove.com/services/link/bcpid1185143625/bctid14269131001
http://www.boston.com/realestate/news/articles/2009/03/05/the_quest_for_cash/?page=2
There's a video inbedded in the link.
http://link.brightcove.com/services/link/bcpid1185143625/bctid14269131001
The billions of dollars the US government has pumped into banks and the economy have not found their way to the Boston skyline. Developers report that lenders are still refusing to finance large commercial buildings.
If anything, lending conditions have only gotten worse since the $700 billion federal bank bailout began, some developers said, with construction financing becoming even more expensive and difficult to obtain.
"It's an outrage. Banks have money, and they're not lending it out," said David Begelfer, chief executive of the Massachusetts chapter of the National Association of Industrial and Office properties. "That's a big problem in Boston and across the country."
The funding freeze has saddled the city with empty work sites and prompted some developers to scale back their plans, in hopes that smaller projects would be easier to finance.
No such luck. The developer of the Filene's block in Downtown Crossing, who temporarily halted construction on the mega-mixed-used project in November and trimmed seven floors from his tower, is now planning for a longer shutdown, as are the builders of a $300 million biotechnology lab in the Longwood Medical Area, who also stopped work in November.
Several other developers are slowing preconstruction work, fearful they won't be able to get loans.
"I had hoped that with the new [Obama] administration we would see a more positive lending market, but if anything it's gotten even tighter," said Tom Alperin, president of National Development, which is building the Longwood Center biotech lab. "It's a really tough dynamic right now."
Alperin had hoped to resume construction by spring. Now, he's just hoping to get going by year-end.
Yesterday, the Federal Reserve said that loans of $50 million or more for commercial development in New England remain "virtually nonexistent." Overall, lending for development projects is down 19 percent nationwide since passage of the government bailout in October, according to the US Treasury.
As economic conditions worsen, the Obama administration is preparing additional measures to get banks to resume lending. One initiative calls for the government and private investors to spend up to $1 trillion to buy so-called toxic assets from banks to improve their balance sheets. A separate program would spend another $1 trillion of government money to provide funds for investors to buy loans and related securities, thus providing new capital for additional lending.
In the meantime, the largest lenders for commercial real estate in New England - Bank of America Corp., Wells Fargo & Co., Anglo Irish Bank Corp., and others - remain largely on the sidelines when it comes to financing skyscrapers and other large mixed-use projects, according to developers and commercial bankers.
Anne Pace, a spokeswoman for Bank of America, said the bank loaned $7 billion for real estate in the fourth quarter of 2008. But she could not say how much of that was allocated to commercial building projects or to developments in Massachusetts.A spokeswoman for Anglo Irish, which did not receive US government funds but has benefited from Irish government aid, declined to comment. Wells Fargo, which purchased Wachovia Corp., another major lender to Boston developers, did not respond to a request for comment
"I'm talking to a lot of people in the capital world right now, and they're basically out of business," said Boston developer Ron Druker, who is trying to proceed with an office development on Boylston Street. "We're in a major trough in the market right now."
There are several explanations for the retrenchment. One is that banks, which used to team up to provide loans of $100 million or more, are now reluctant to do so because of uncertainly about one another's solvency.
Moreover, banks are dealing with their own individual financial problems, making it difficult to negotiate uniform terms for a syndicate of lenders. While one bank might be willing to put up $50 million for a project, others might want lesser amounts and more stringent lending terms.
Another problem is the lack of a secondary market where banks can sell the deals they make with developers. In 2006, the securitized lending market accounted for more than $230 billion worth of deals. But it nearly vanished after huge losses related to subprime mortgages and other bad loans scared off investors. Last year, securitized lending dropped to $20 billion nationwide, and many bankers believe the market will not reemerge 2009.
"The entire business model of making commercial loans and selling them has failed miserably," said George Fantini, a principal in the mortgage banking firm Fantini & Gorga.
Typically, banks rely on their ability to repackage and sell loans to investors to replenish their capital and lend out more money.
On the streets of Boston, the credit crisis is making life uncomfortably quiet. The Filene's block downtown is an idle construction site with a big hole in the ground. The developers of the massive Columbus Center project over the Massachusetts Turnpike, where construction was stopped almost a year ago, have gone from one delay to another as they continue to hunt for funds to resume the $810 million development.
Elsewhere, the builders of a proposed 40-story tower over South Station have held off, as has developer Joseph Fallon on the second office building at his 21-acre Fan Pier site in South Boston.
The funding delays have prompted Mayor Thomas M. Menino to ready a $40 million pool of loans to restart development, targeting projects that have financing gaps.
At the state level, the slowdown is threatening to undermine Governor Deval Patrick's plan to use federal stimulus money to trigger a slew of private building construction. The governor wants to use some of the expected $5 billion to $6 billion for bridges, roads, and other construction near private development, but it would have limited impact if those builders can't move forward.
"We're clearly in the down part of the cycle right now," said Greg Bialecki, Patrick's secretary of Housing and Economic Development. "We will still have about $500 million in new road and bridge money. But admittedly, it would be a better thing of those dollars were a catalyst for private developers to build their buildings."
Casey Ross can be reached at cross@globe.com.
http://www.boston.com/realestate/news/articles/2009/03/05/the_quest_for_cash/?page=2