A compromise enabled developers QMG to gain approval for a 362-foot-tall apartment tower in exchange for deeding 264 Huntington Ave. to the nonprofit theater group.

The opening act of the long-planned Huntington Avenue project – involving construction of a new 32-story apartment tower and simultaneous renovation of the next-door Huntington Theatre – gets underway early next year when development group QMG Huntington LLC starts demolishing two small buildings in preparation for full-scale construction along the city’s “Avenue of the Arts.”

Executives at QMG, a partnership of Quinlong Management and Boston-based Matteson Cos. and GFI Partners, and the administrative cast at the Huntington Theatre hope to be taking bows after completion of the new 426-unit residential tower and refurbished theater in mid-2021.

“It’s going to transform the area,” said Michael Maso, managing director at the Huntington Theatre, which hopes to raise about $70 million for its theater renovation portion of the highly coordinated mixed-use project.

“It’s a win-win situation for everyone,” said John Matteson, founder and CEO of the Matteson Cos., referring to the complex and long negotiations it took to bring about agreement on the unusual multifamily residential and entertainment-venue project.

The ball got rolling on the project when QMG purchased the Huntington Theatre building at 264 Huntington Ave. and two single-story buildings next door from Boston University for $25 million in 2016. As the long-time owner of the properties, Boston University had leased the 870-seat playhouse to Huntington Theatre since the company’s founding in 1982.

According to the actors in the ensuing development drama, the main goal was always to find a way for QMG to build a new apartment tower while at the same time allowing the Huntington Theatre to stay at its current location.

Compromise Reached on Tower Height

After nearly two years of intense talks – and the heavy involvement in the planning process by the Boston Planning and Development Agency and neighborhood groups – an agreement was struck: QMG would get to double the height of its planned apartment tower to 362 feet in exchange for handing over the deed to 264 Huntington Ave. to the nonprofit theater.

The Huntington Theatre will also get to use 14,000 square feet of space in the future apartment tower as its new first-floor lobby and ticket office, and second-floor conference and small performance spaces. There will also be a small café on the ground floor.

QMG officially gifted the existing playhouse building to Huntington Theatre earlier this fall and is now focusing on construction of its apartment tower on the smaller site where the two single-story buildings currently stand. Those two buildings over the years have been used as auxiliary space by the theater.

“We’re very excited about the outcome,” said Matteson of the project’s unique agreements. “Everyone worked together to come up with the best option.”

QMG expects to spend nearly $300 million on the apartment building portion of the overall project. In the end, about 13 percent of the 426 units will be classified as affordable housing, while the other market-rate units will be rented out mostly to young professionals, empty nesters and others, Matteson said.

Kelly Brilliant, executive director of the Fenway Alliance, which represents 21 cultural and academic institutions in the neighborhood including the Huntington Theatre, said her group is satisfied by the outcome of negotiations.

“Our goal all along was to keep our theater,” she said, praising QMG and Boston Mayor Marty Walsh’s office for working hard to find a compromise agreement.

As for the increased height of the planned apartment tower, Brilliant said not many objections were raised because it’s not in the middle of a residential neighborhood.

“The location was fine as far as increased height,” she said. “I actually think (the taller tower) will be a net benefit. It kind of makes us look more like an urban center. It sort of adds to the sparkle of the area.”

The 100-year-old theater building was in desperate need of improvements Maso said. The plumbing and electrical systems will have to be upgraded or replaced, he noted.

Meanwhile, the interior and exterior of the theater will be restored to their “more classical looks.” One interesting twist: The number of theater seats will be reduced by about 100, though Maso said seating sight-lines will be improved, as well as the acoustics of the playhouse.

The theater will remain open until about mid-2020, when the company expects to close the building for a year for the renovations. During the year of work, the Huntington will hold performances at the South End’s smaller Calderwood Pavilion, which the theater currently leases from the Boston Center for the Arts.

The goal is to open both the new apartment tower and renovated Huntington Theatre at roughly the same time, said Maso.

“It’s really going to expand what we can do at the Huntington,” said Maso of the refurbished theater and added space in the new apartment complex. “It will really transform the Huntington.”