Re: Waterside Place
Waterside Place plans undergoing changes
Boston Business Journal - by Michelle Hillman
Friday, October 31, 2008
The long-awaited mega-retail and air-rights project called Waterside Place in South Boston is being retooled and likely will emerge as a much smaller ? and easier to finance ? development. Major design changes are under way that would eliminate the need for a costly deck to be built above state highway ramps.
Waterside Place is the latest project to suffer setbacks due to financial constraints caused by the credit crisis.
Originally, Waterside Place was designed as a 640,000-square-foot retail center, a 300-room hotel and a 19-story, 200-unit residential building. The retail portion of the project will be reduced by at least 100,000 square feet and the hotel and residential components likely will shrink. By how much has not yet been determined.
John Drew of the Drew Co. is talking to the Massachusetts Port Authority, which owns the 11 acres where he plans to build Waterside Place, about building the air-rights project in phases rather than one, large project. The new design will give Drew flexibility in terms of securing financing and pacing the development to match market needs.
Developers are having difficulty securing financing for projects because banks shore up their balance sheets by hoarding cash and steering clear of risky loans. As a result, a number of developments in Boston are crawling along, or not progressing at all. Last week, Drew told the Boston Business Journal that he was proceeding slowly with Waterside Place because the market was in bad shape. Drew did not return a phone call for comment this week.
Drew, whose partner is New York-based Vornado Realty Trust, had filed plans to construct Waterside Place ? which is bordered by Congress and D streets, World Trade Center Avenue and the Mass Haul Road ? over the Massachusetts Turnpike by building a deck or platform. The plan being considered now would consist of building three separate structures on land that would not require a deck. One source said the chance of a deck being built is about 5 percent.
Financing a project of Waterside Place?s magnitude is certainly an issue for Drew, but he is also facing high costs related to the concrete and steel needed to build the deck, said Lowell Richards, chief development officer of Massport.
?If we don?t have a deck it would probably have to be three distinct developments as opposed to air rights,? Richards said.
Richards said building a deck at this point is financially unfeasible because of the cost of materials. It?s being made even more difficult because of the financial crisis, he added.
Richards said it would be easier to obtain financing for a phased project, but even with a construction loan in hand, Drew wouldn?t be able to start the first phase without some degree of certainty that the remaining two phases could be financed. The city is taking a hard look at requiring developers to secure financing before construction begins.
Richards said the retail aspect of the project could shrink by 100,000 square feet to 150,000 square feet. He was unsure whether the hotel or residential portions of the project would be reduced and said many of the issues being worked out depend on parking.
?I don?t consider it to be a totally different project,? Richards said. ?The design would be totally different but the uses will still be the same.?
Drew has a long-term lease with Massport for the South Boston land where Waterside Place will be built. Significant changes to the project?s design may require the agreement to be revised, said Lowell.
Drew has been planning and designing Waterside Place since 2004 on land previously known as the Core Block. The project was looked at as a boon to the South Boston waterfront neighborhood where a mix of residences, retailers and entertainment uses have long been promised. Despite delays, Massport and Drew are working to move a redesigned project forward
Waterside Place hit a snag last year when two of Drew?s former partners ? Edward A. Fish Associates and the Kraft Group LLC, operating as Maxx Private Investments LLC ? sued Vornado and him, alleging the project had exceeded the agreed upon $600 million budget. Fish and the Kraft Group are no longer involved in the project, Fish confirmed in an phone interview. He said development ?just isn?t working these days.?
Vivien Li, executive director of the Boston Harbor Association, said few projects are moving forward and those that are should be applauded. Li said a phased development would allow Drew to build only what makes sense now and postpone other uses, like residential, until the market rebounds.
?It?s a tough market,? she said. ?I think that it?s challenging to get financing. I don?t think any one project you could say is dead on arrival ... all along the waterfront it has been a challenge to develop.?
Link
