Reason To Be Wary About The Waterfront
Developers talk big, but small details may pose problems
By Scott Van Voorhis
Banker & Tradesman Columnist
Scott Van Voorhis
Are long-standing dreams of a vibrant South Boston waterfront set to be dashed yet again?
I am rooting hard for Fan Pier. Just maybe a quarter century of grandiose development schemes and legal battles has finally come to an end. Ditto for the equally star-crossed parking lots just across Northern Avenue, where Frank McCourt spent decades spinning his own development fables.
But I am not holding my breath, either.
On paper, anyway, everything seems right on track. Joe Fallon, the underrated superstar of waterfront development in Boston, is in serious talks with Cambridge-based biotech Vertex Pharmaceuticals about relocating its headquarters to Fan Pier.
Meanwhile, John Hynes, builder of the gleaming State Street tower, has been pounding the pavement, holding court before groups of Southie activists and elected leaders with his sweeping plans for millions of square feet of new homes, offices and shops.
But there are some things that should make even the most unabashed waterfront booster nervous.
While on a roll now, Vertex has a tortured history when it comes to its real estate moves. If its last big headquarters shift is any prelude to what might be in store for Fan Pier, Fallon might hope he had instead signed a lease deal with AIG.
As far as Hynes is concerned, his money is coming from a Wall Street investment fund. While the Morgan Stanley fund likely only has a minimal contribution from the investment bank itself, with the rest of the money coming from pension funds and the like, just having to point that out is a sign of these crazy times.
It?s anyone?s bet which deal is facing the bigger problem now.
Let?s start with Vertex.
That fast-growing biotech was on a tear back in 2001, when it signed a lease for a striking new, 290,000- square-foot glass headquarters in East Cambridge.
However, the ink was still drying on the agreement when I caught word at the Herald, where I covered development, that Vertex would not be moving in after all.
It seemed hard to fathom ? especially since the firm was on the hook for millions in lease payments.
But it turned out to be true. Some of the Vertex? s drug development programs had not yet produced the results the company ? and investors ? had hoped for.
So the big move was on hold, though few at the time would have guessed that would mean not just for a few months, but for years.
That beautiful new research building sat empty right into mid 2004, when Vertex began subleasing space to other local biotech companies.
Today Vertex occupies three floors of its headquarters building, and, with two other floors subleased out to other firms, is looking once again for room to grow.
And the long-awaited Fan Pier project on the South Boston waterfront, which has been in the market for a tenant for roughly two y ears without landing a big fish, has the space.
But there are signs that all may not be well as Vertex explores another big headquarters move.
There?s talk that Vertex has put a halt on some of its architectural planning work ? a rumor the company won?t address since it won?t even acknowledge publicly yet its interest in Fan Pier.
Less bashful, Mayor Thomas M. Menino told another local paper that Vertex is working on wrapping up its financing.
Just what you wanted to hear amid a global credit crunch.
Bubbles Bursting
None of this means that Vertex isn?t a great company. But it?s in a volatile business where a disappointing clinical trial can send a promising firm into a tailspin.
Still, Hynes has his own hands full as he tries to keep his dreams alive of building a mega project on South Boston?s waterfront.
Hynes and Morgan Stanley Real Estate Fund V landed a deal more than two years ago to buy 23 acres of parking lots near the harbor from McCourt, now owner of the Los Angeles Dodgers. At that time, having a top New York investment back backing the deal was a sign of strength. Now, at the least, it prompts questions. An official familiar with the Morgan Stanley fund says the equity is all there to complete the $3.5 billion Seaport Square, and rest assured, the project is moving forward.
It?s a familiar line when it comes to development on South Boston?s long-awaited new waterfront. Here?s hoping this time around everything works out as planned.
