| 
Imagine if you spent $15 million on a swimming pool and your new neighbors started dropping by every day for a dip.
Federal Realty Investment Trust executives might be feeling a similar sensation after contributing to a $56 million MBTA Orange Line station which opened in 2014 at their Assembly Row development in Somerville. In January, developers Cresset Group and Novaya Ventures acquired an aging office property next door for $35 million, and are marketing 650,000 square feet of planned new office and lab space.
That poses direct competition to Federal Realty, which still has 1.5 million square feet of approved office and lab space seeking tenants at Assembly Row.
“The cost for the T station is sunk, and that is the nature of our world,” said Patrick McMahon, Federal Realty’s vice president of development. “I’m not sure if there’s a better way, but in order to construct a T station and make such a significant investment it does require more than just one party. In our case, it was a public-private partnership that got that done.”
A similar dynamic is playing out in Allston. New Balance paid for a $20-million MBTA commuter rail station which opened in 2017 at its 1.8-million-square-foot Boston Landing development.
With 10-minute trips to Back Bay, Boston Landing station may have prompted Stop & Shop Supermarket Co. to pursue a 1.9-million-square-foot redevelopment of its retail property next door. The grocery chain is proposing over 1,000 condominiums and apartments and 300,000 square feet of office space. And other developers are acquiring nearby parcels, primarily for multifamily housing.
The private sector’s financial contribution toward transit grows as the increasingly unreliable MBTA prioritizes its $8-billion repair backlog over expansion. In Lynn, developer Charles Patsios has agreed to pay for a new commuter rail station as part of 1.5-million-square-foot redevelopment plans for the 65-acre General Electric Gear Works property.
And in South Boston, Boston-based Redgate Capital Partners is offering to pay for new MBTA bus routes as it pitches a 1.9-million-square-foot redevelopment of the former Boston Edison plant.
Acknowledging overcrowding on the MBTA’s 7 bus route to Downtown Crossing, Redgate is studying potential new routes to South Station via D Street, First and A Streets or a “City Point Express” route along Summer Street.
But unlike some jurisdictions, Massachusetts lacks a comprehensive strategy to fund large-scale transit projects. And therein lies a lost opportunity, according to some transportation planners.
Steve Adams
Gauging the Value of Transit-Oriented Sites
Recent research confirms the increasing value of transit-oriented sites in Greater Boston.
Vacancies at office buildings near MBTA stations with two or more rapid transit lines are the lowest in the city of Boston at 4.6 percent, according to an August report by Cushman & Wakefield’s local research team. Such buildings have average weighted asking rents of $62 per square foot, which is 13 percent higher than buildings near a single-line T stop.
That’s prompted a busy pace of transit-oriented construction since 2013, with five million square feet of development completed within 0.1 miles of a T stop.
Some transit-oriented projects – most recently Boston Properties’ 1.9-million-square-foot Hub On Causeway – have benefited from the state’s I-Cubed (Infrastructure Investment Incentive) program launched in 2006. Developers and the state jointly pay for public infrastructure up to $50 million.
The Assembly Row partnership combined land swaps and state investments in other portions of the project while Federal Realty led the transportation improvements.
“The goal really was for Assembly Row to be a transformative project not only for its footprint, but also the land around it,” said April Anderson Lamoureux, an economic development consultant and former assistant secretary for economic development in the Patrick administration.
By that measure, Anderson said, the deal was a success.
“If you’re relying on public funding, there’s no way you can do everything you want to get done. A private party spreads the wealth to other parts of the state that wouldn’t capture those resources,” she said. “So it seems like a win-win to leverage more transportation infrastructure.”
In January, noting that Massachusetts “does not have a statewide, comprehensive transportation blueprint,” Gov. Charlie Baker appointed an 18-member Commission on the Future of Transportation in the Commonwealth to study topics including resiliency, autonomous vehicles and land use and demographic trends.
The executive order does not mention a focus on financial models or partnerships. Massachusetts Department of Transportation spokeswoman Jacquelyn Goddard said the group’s discussions are private until the release of its report on Dec. 1.
But some see alternatives to Massachusetts’ project-by-project approach, citing successful models in other regions. State Rep. William Straus, D-Mattapoisett, has unsuccessfully sponsored legislation that would allow communities to collect property taxes to pay for transportation projects. And a 2017 study by Metropolitan Area Planning Council noted that Massachusetts does not have financial models well-suited for paying for transit improvements that serve multiple properties. The study suggested creating community benefit districts to pay for transit operations, and changes to the I-Cubed program to make funding for transit-oriented developments available earlier in the project timeline.
Denver’s half-billion-dollar Union Station project is considered the gold standard for public-private partnerships combining transit expansion and development, said Rick Krochalis, development consultant and former regional administrator for the Federal Transit Administration.
A master developer and four public agencies partnered on the half-billion-dollar project renovating and upgrading the station, using tax increment financing and anticipated future revenues from development to pay off $300 million in up-front debt. More than 2.3 million square feet of commercial development and 3,000 housing units have been completed.
“A lot of transit agencies act like utilities: ‘Just let us build it first, and then you can do your land use around it,’” Krochalis said. “But that misses opportunities for value capture. It we build it together, maybe we can share costs and our station can link right into your hotel or your office. The main takeaway there was the private sector has to be willing to partner, but government has to organize themselves so they can interact with the private sector.”
And the more people in the pool, the better, Federal Realty’s McMahon said.
“Those who realize value from locating in and around a transit node should be at the table in order to figure out how to finance it, or economically make it work,” he said.
