Northeastern University is still working on a plan to construct a new hotel at its Renaissance Park, located at 1135 Tremont St. in Boston’s Roxbury neighborhood.
John P. Connolly wishes Northeastern University luck as the school moves to kick-start a hotel at its Renaissance Park in Roxbury – lots of luck.
“Financing is available, but the terms aren’t necessarily more attractive than they were a few years ago,” the veteran developer said last week as his firm continues a lengthy effort to construct a hotel at Stuart and Tremont streets in Boston’s Theater District. Complicated by a spike in construction materials, particularly for steel, Sawyer Enterprises has struggled to make the plan work as originally conceived. That led the firm about a year ago to make the shift, with the 390-room Loew’s Hotel now replaced by a combination of approximately 80 condominiums and 200 hotel rooms.
Sawyer hopes to have the changes approved and be under construction by next spring. Inflexible financing can be addressed, Connolly said, but he estimated that construction costs are up 30 percent to 40 percent from what was originally projected.
“It takes a lot of value engineering to get that under control,” he said, joining other observers in citing unprecedented growth in China for depleting the supply of raw materials. As with most commercial buildings in the city, Sawyer’s would be made of steel, said Connolly, maintaining that there are not enough efficiencies in concrete construction locally to make that a viable cost alternative.
The option instead has been to take advantage of the hot residential climate. Not only is the city supportive of downtown housing, Connolly said, but Sawyer anticipates the combination of empty nesters and mid-career professionals will keep demand brisk indefinitely. “Even though we are seeing a lot of units being built, it winds up not being a huge number [delivered] annually,” said Connolly.
He added, “The market is real, and it is going to continue strong into the future.”
As with other mixed-use properties featuring hotels and condominiums, Sawyer plans to offer hospitality services to unit owners, enhancing its appeal to prospective buyers. Connolly is equally upbeat on the hotel front, noting gains in occupancy levels even as room rates struggle to appreciate. That will come over time, said Connolly, whose firm initially aimed to be under construction by 2002 until the terrorist attacks of 2001 soured the hotel sector for nearly three years. The Massachusetts economy could hardly be described as a miracle these days, but Connolly said he believes corporate travel is on the mend. “I think the city is doing just fine,” Connolly said of the hotel market, a notion seconded by Pinnacle Advisory Group’s mid-year projection of a 73 percent occupancy rate in Boston for 2005. Another plus for Northeastern, according to Connolly, is potential activity from college-related travel, noting that other schools with hotel stakes (aka Harvard University and its Doubletree Hotel in Cambridge) have benefited from that line of business.
‘Down to a Trickle’
As reported last week on Banker & Tradesman’s Web site, bankerandtradesman.com, Northeastern has retained CB Richard Ellis/Whittier Partners of Boston to peddle a hotel parcel at Renaissance Park at Northeastern University, which currently consists of a 10-story parking garage and nine-story, 160,000-square-foot office building. Also known at 1135 Tremont St., the building was constructed in 1993 as part of a city backed plan to spark economic development in Roxbury’s emerging Ruggles neighborhood.
Citing confidentiality agreements, hotel broker David McElroy of CBRE/Whittier Partners – who will handle marketing of the site – declined to discuss specifics of the Renaissance Park assignment, but concurred that Greater Boston has seen a stabilization of hotel fundamentals since 2004. Traditionally a strong market, the Hub was further tightened by the halt in construction after the 9/11 terrorist incidents, but McElroy said the region is now scrambling to catch up. “The supply pipeline was down to a trickle,” said McElroy. Now, he said, hotel land sites are being pursued aggressively by developers, while others are dusting off plans shelved by the downturn. McElroy said that scenario, coupled with an active market for existing hotel properties, means he has never been busier.
“The pricing and the ratio of deals that close are as great as I’ve ever seen it,” said McElroy, who earlier this year brokered the $14.5 million sale of One Court St. in Boston to O’Callaghan Hotels, an Irish chain that acquired the 14-story Financial District building from Intercontinental Real Estate Corp. The property came with an approved plan for a boutique hotel, one that O’Callaghan Hotels is now pursuing.
In confirming CBRE/Whittier’s selection to market the hotel site at Renaissance Park, which is located at 1135 Tremont St., Northeastern spokesman Fred McGrail last week said he believes the decision to push forth was likely a combination of favorable market timing and the school’s commitment to the neighborhood that it would create an economic generator at the complex over the near term. The pact was forged when the Boston-based institution paid $17 million in 1997 to acquire the troubled office building. Built amid complaints that too much investment was concentrated downtown, the erstwhile Ruggles Center took a big hit when Massachusetts Registry of Motor Vehicles workers complained of health problems soon after the agency was relocated to the property in the mid-1990s. The agency had signed a multi-year lease as another public effort to support the property was made by state officials.
Today, Renaissance Park is fully leased to multiple tenants, including several hospital-related operations such as Partners Health Care, Harvard Medical International and Beth Israel Medical Center. Finard & Co. of Burlington is leasing agent for the building. McGrail said no decision has yet been made on whether Northeastern will sell the development site outright or remain a partner in the project, but he indicated the latter option is slightly favored. The number of units is also undetermined, he said, calling the design effort “preliminary,” and pledging that the school will seek input from the community and city agencies. “It’s pretty early in the game,” said McGrail. Sources, however, estimate that the hotel would feature between 150 and 200 rooms.
