In September, when the Massachusetts Turnpike Authority rejected a pair of bids to redevelop a long-vacant garage along the Rose Kennedy Greenway in Boston, the Turnpike’s real estate chief suggested the bids were being tossed out because they wouldn’t generate sufficient revenue for the cash-strapped agency.
A review of the financials the Turnpike rejected suggests that might not be the case. It now appears the Pike may have shot down the proposals for the Parcel 7 Garage in order to speed development at neighboring parcels – including one that will likely be designated for development this week.
Previously-confidential documents obtained by Banker & Tradesman show the Pike turned down a deal from Boston-based developers WinnCompanies that would have paid top-market rents and returned all but a modest slice of revenues to the Authority. Over the proposed lease’s first 30 years, Winn offered to pay the Pike $75 million. In the deal’s first 10 years, the Pike would pocket 80 percent to 90 percent of the building’s net income.
Winn’s bid proposed taking 33,000 of the parcel’s 46,000 square feet of office space as the new headquarters for WinnResidential, and leasing out the rest. Winn underwrote its bid at $35 per square foot, with 21 percent appreciation in revenues every five years. Class B asking rents in the North Station area are now averaging $27 per foot, according to Richards Barry Joyce & Partners. In its request for proposals, the Pike offered to provide public-sector tenants at $25 per foot.
State House and real estate insiders privately panned the Turnpike for walking away from Winn’s bid. One, who regularly does business on Beacon Hill, called the outcome “a clear example of why real estate development should be taken away from them.” Speculation about the Pike’s reticence has centered on the potential for embarrassing press for hopping in bed with Winn, the erstwhile developers of Columbus Center.
According to sources close to the deal, there’s a different play afoot.
Trashing A Deal Over Trash?
The Turnpike is expected to designate a developer for a nearby Greenway parcel at its final board meeting. In rejecting all bids for Parcel 7, the Pike looks to be clearing the way for a big play on Parcel 9. When it does, it will need a way to speed construction while appeasing the Haymarket Pushcart Association, which has used Parcel 9 for trash and storage. Storage could move to the garage building’s still-vacant retail space. That option wouldn’t be on the table – and the Pike would find itself boxed in with the politically-sensitive pushcarts – if the Pike had just awarded the garage to a developer.
Such a line of thinking would indicate the Pike is prepared to award Parcel 9 to Eastat Realty Capital, which wants to build housing on the site. The Pike likely wouldn’t turn down Winn’s cash and then give away a neighboring parcel to a museum with a tough capital campaign ahead of it.
De-prioritizing the market space at Parcel 7 should also clear a potential roadblock for the construction of a supermarket in the nearby Bulfinch Triangle. The supermarket project is higher on Mayor Tom Menino’s priority list than Parcel 7 is, and staving off competition from the proposed Parcel 7 market would help the supermarket get in the ground.
