One of the of the nation’s most ambitiously-scaled downtown redevelopments, the Quincy Center project, faces a change of direction as city officials scramble to rewrite the plan and recruit new private-sector partners.
The master developer, Street-Works of White Plains, N.Y., faces removal from the project as soon as March 21 after missing a series of deadlines and financial obligations, according to Quincy Mayor Thomas Koch.
Koch said he expects Street-Works to negotiate with other partners to exit the project.
“They understand they’re in default. They didn’t argue all those points,” Koch said.
Quincy Mutual Fire Insurance – which has already invested more than $18 million, the most of any partner, according to Koch – will take the lead role with backing from LaSalle Investment Management of Chicago and Twining Properties of New York City. Additional investors are being sought, Koch said.
“I know they’re certainly in the market looking for some equity partners,” Koch said. “They’ve spent a lot of money in the downtown.”
Twining Properties and LaSalle did not response to requests for comment, while Quincy Mutual referred to Koch to speak on its behalf.
The first phase of the $1.6-billion project – a block of apartments, shops and offices known as Merchants Row – has been in limbo since fall of last year, amid rising cost estimates. Originally projected at $120 million, cost estimates spiraled as high as $170 million, according to statements by Street-Works executives, and construction stopped in October. The agreement signed by Street-Works and the city in 2011 holds the developer responsible for delays related to market conditions and lack of financing.
An Ongoing Concern
Rising construction costs are affecting many projects in eastern Massachusetts as demand rises from the booming commercial and multifamily sectors in Boston and Cambridge. Higher costs of raw materials and skilled labor drove up construction costs 5 percent nationwide in 2013 over the previous year, according to the Associated General Contractors of America. The increase was likely even higher for commercial projects, said Ken Simonson, the association’s chief economist.
“We have heard reports from many parts of the country about difficulty getting skilled workers. That has sometimes caused project delays,” he said.
The master plan, part of Street-Works’ vision for “the rebirth of the great American downtown,” appeared to have all the ingredients of the walkable, mixed-use developments identified with the smart growth movement. It calls for 3.5 million square feet of development, including 1.8 million square feet of commercial space and 1,400 housing units spanning 20 blocks.
But the redevelopment of an aging Gateway City downtown comes with higher costs and complexities than many projects. Infrastructure costs were estimated at $269 million, with the state and federal governments chipping in $50 million, and the rest paid through special tax assessments on downtown properties. The city bonded $30 million to build a long-planned connector road, the Quincy Concourse, which provides an additional route into the downtown from the busy arterial Burgin Parkway. The half-mile-long road opened in 2011.
Seeds Planted In 2004
The seeds of the downtown redevelopment plan date back to the administration of William Phelan, who was mayor between 2002 and 2008.
In 2004, city officials learned that the downtown was on the verge of losing its largest corporate presence, with Stop & Shop Supermarket Co. considering a move to a suburban office park. Since the 1980s, the grocery chain has occupied a 10-story, 216,000-square-foot office building in the heart of downtown. Stop & Shop currently has 762 employees in the Quincy building, which serves as its New England division offices and support offices for its parent company Ahold USA, spokeswoman Lindsay Hawley said.
In 2008, two weeks before he was unseated by Koch, Phelan announced that Stop & Shop had agreed to keep its headquarters downtown, and that the city had partnered with Street-Works on a massive redevelopment project that could also include a Target store.
Street-Works arrived in Quincy with an impressive track record of revitalizing town centers in Bethesda, Md. and West Hartford, Conn., where it built the Bethesda Row and Blue Back Square developments. But Street-Works’ plans for Quincy were larger than its earlier downtown makeovers: $125 million at Bethesda Row, and $180 million at Blue Back Square, which opened in 2007.
In 2011, Street-Works partner The Beal Cos. of Boston acquired the landmark Granite Trust bank property across from the Stop & Shop building for $5.8 million. It obtained a $5.9 million mortgage from Quincy Mutual Fire Insurance.
Spirits were high last June when the city and developers marked the groundbreaking of Merchants Row. Less than two months later, Beal Cos. was replaced as a partner by Twining Properties. In April, Beal announced a merger with New York-based Related Companies.
After demolishing a block of buildings last summer, Street-Works announced in August that it would reduce the housing in Merchants’ Row from a 15-story steel-frame tower to a six-story wood-framed complex. But the savings in material costs might have been negligible, said Simonson, the AJC economist.
Construction ended in October. Under the 2011 agreement, if the master developer falls behind on the timeline, the mayor may terminate the agreement within 30 days of giving notice.
The next phase of work – called Block Four – involves a block of land behind the Granite Trust building bordered by Chestnut and Hancock Streets and Cottage Avenue. Designs for that parcel are being tweaked, but currently include 280 apartments in six stories, with 40,000 square feet of ground-level retail surrounding a parking garage, Koch said. He is now targeting a resumption of activity by year’s end.
“I burned myself too many times already giving dates,” Koch said. “The goal is obviously to be in the ground by 2015. That’s our hope.”
Email: sadams@thewarrengroup.com
