Save for perhaps the Bay State’s most well-known piece of terra firma, Fenway Park, commercial real estate issues appear to be a relatively minor piece of the agenda facing the Massachusetts Legislature as it nears the July 31 completion of the latest session.

“Not a lot is happening, and not a lot is expected to happen,” acknowledged David Begelfer, chief executive officer of the National Association of Industrial and Office Properties’ regional chapter.

Others agreed that the pace has been slower in 2000, especially compared to previous years when such controversies as the Rivers Protection Bill, Brownfields legislation, and Mechanic’s Lien Law kept real estate professionals hopping on Beacon Hill until the final moments of debate. At the same time, there are several measures industry groups are currently pursuing, including a fast-track bill which the Greater Boston Real Estate Board hopes will resolve what it considers to be a threat to commercial landlords.

The GBREB issue relates to a pilot program launched by the state four years ago. Currently in place in Middlesex and Norfolk counties but expected to soon expand statewide, the initiative restricts a case to where it can only be filed once, either in District Court or Superior Court. Intended to unclog the state’s court system, the effort was complicated recently when the Supreme Judicial Court ruled that commercial property owners seeking to evict tenants and collect back rent can only do so via the Superior Court if the money in arrears exceeds $25,000.

GBREB Government Affairs Director Joy Conway said it is unclear why the Supreme Court made such a ruling, and added that her group was unaware of the situation until recently being informed of it by Susan F. Brand, the general counsel for Cummings Properties of Woburn. The problem, according to Conway, is that there is no summary process allowed in Superior Court, meaning it could take years to evict a commercial tenant and recover the owed money. The $25,000 threshold, she added, would almost always be exceeded in a commercial case.

“It sounds very arcane, but in terms of significant dollars in your operating budget, this one was very important,” Conway said. It was deemed so critical that GBREB drafted an amendment in mid-June that was then attached to an existing bill expanding the pilot program. The provision, which would restore the option of going to District Court, is now awaiting Gov. Paul Cellucci’s signature.

“We really had to work very fast,” said Conway. “The problem did not arise until late in the game, but we felt we had to do everything we could to address it.”

Thanks to some preliminary work when the matter appeared before the Boston City Council earlier this year, Conway said the GBREB supports a home rule petition that would allow the Hub to increase linkage payments from developers for construction of new commercial space. It would raise the current $6 payment for every square foot over 100,000 square feet of development to $7.18 per square foot, reflecting the increase in the Consumer Price Index since the city’s linkage program began in 1987. Future hikes based on the CPI would also be allowed.

While certainly not a favorite of the development community, Conway said the GBREB supports the changes to the linkage effort, which is designed to create jobs and affordable housing. The group initially fought the plan based on two stipulations that the city council later agreed to eliminate, one that would have made the first 100,000 square feet also susceptible to the charge and another that would have required the payments up front, as opposed to the staggered seven-year schedule currently in place.

“As it’s now written, it is acceptable to our organization,” said Conway, noting that GBREB President Ronald M. Druker spoke in favor of the petition last week before a joint committee hearing of the Housing and Urban Development Committee.

Community Preservation Act
Of all the legislation GBREB is currently tracking, none would be more welcome, according to Conway, than passage of the Community Preservation Act. The law could put to end a 15-year effort to allow cities and towns to create so-called transfer taxes, which are levies on the sale of residential and commercial properties that would be used to fund such ventures as affordable housing, preserving open space and saving historic properties. The fee, which has been proposed for anywhere between 1 percent and 2 percent of the sales price, is deemed unfair by many real estate groups because of its perceived burden on a small group of buyers and sellers of properties rather than entire communities.

Under the new Community Preservation Act, cities and towns could elect to impose a 3 percent surcharge on all real estate tax bills to accomplish the same goals as the transfer tax. Conway said it is a preferable formula because it spreads community benefits out to all who would enjoy them.

“We think this is going to be the year for the community preservation legislation, and we think it’s going to be in a form we can support,” Conway said. “We feel optimistic that it is going to finally happen.”

Begelfer voiced similar hopes, adding that NAIOP has also vigorously opposed the transfer tax notion in past years, especially with the implications it might have on the sale of large commercial assets.

NAIOP’s focus this year is on supporting measures that would enable communities to better facilitate commercial development. The top priority, Begelfer said, is a bill that would allow cities and towns to secure bond financing to improve local infrastructure, including increased sewage capacity, better roads, or perhaps a parking garage. The bonds would be repaid via increased real estate taxes.

“That is one [bill] that we’re really pressing on and will be monitoring over the next couple of weeks,” Begelfer said, although he added that, “we’re not overly optimistic” about its passage given other more high-profile priorities in the Legislature.

A similar bill, H.2269, would create a revolving loan fund that could be leveraged by both local governments and developers for infrastructure upgrades. Despite his concerns that those measures would be given back-burner treatment, Begelfer said NAIOP considers them critical to fostering future development throughout the state.

“The Big Dig has sopped up a lot of money, and many municipalities have been waiting years to get these improvements funded,” he said. “This is just another tool that they could use to [bolster local infrastructure].”

On the construction front, the Associated Subcontractors of Massachusetts is also keeping an eye on the Legislature, but ASM Executive Director Monica Lawton said her group is not as concerned as it was last year about various proposals to change the state’s public construction bidding system. In 1999, following an extensive review by the Cellucci administration, efforts were made to streamline the way subcontractors, contractors and designers are selected for public projects. While it did garner some support among industry trade groups, ASM fought attempts to raise the threshold for when a separate bidding system for subcontractors would be mandated.

Known as Chapter 149, the subcontractor bidding system is the backbone of ASM’s agenda annually. The group maintains that having a separate system protects ASM’s members from being taken advantage of by general contractors. ASM’s concerns about last year’s reform package played a significant role in its defeat.

This year’s changes are significantly more restrained, with measures that would improve value engineering to keep projects within budget and a proposed qualification system for contractors. Overall, Lawton said ASM supports the latest ideas in play.

“From our point of view, we believe there is still more than can be done on construction reform, but we have to feel pleased with what’s in the budget now,” she said. “We’ve been fearful over the past year that it might be too aggressive and damaging to the system, but we have worked hard to persuade the legislature to make rational changes that are beneficial to everyone. For the moment, we have to be pleased with what has come out.”

Linkage, CPA Top a Short List Of Unresolved Industry Issues

by Banker & Tradesman time to read: 5 min