The Victor. The Merano. Liberty Wharf. Waterside Place.
These real estate projects have all recently gained media attention as development moves ahead in earnest in downtown Boston and the Seaport Innovation District.
But why are so many of these projects located on state-owned land? And what skill set or knowledge base do these types of projects require that a developer may not need for developing privately-owned land?
Developers seek out publicly-owned land for private development projects for a number of reasons, ranging from the unique locations available (such as waterfront) to the lower up-front costs of ground-leasing versus purchasing the site.
As the pressure increases on state agencies and public authorities to find sources of additional revenue, more and more of these sites are becoming available for development. In some cases, the developers themselves initiate the conversations, which ultimately lead to the state’s disposition of a parcel of surplus land.
Although these private development projects on public land have many of the same characteristics as more traditional private development of privately-owned land, there are nonetheless significant distinctions that the developer needs to identify and incorporate into its approach to the project.
Do It Their Way
Developers can progress to a successful building opening if they understand the constraints under which state agencies and public authorities operate, the varied constituencies who weigh in on the size and composition of the project, and the goals of the agency or authority with which they are dealing.
By contrast, those who insist on forcing the state agencies or public authorities to do things their way, or constantly threaten to go over the heads of their negotiating counterparts, will find themselves enmeshed in long and difficult negotiations, which may cause them to miss a market cycle.
Negotiation Tips
To help prevent that dismal result, below are seven tips for private developers in negotiating the development of public land:
Use prior deal terms to help you. Always get copies of the final signed documents from recent comparable deals negotiated by the agency or authority at issue (under the Massachusetts Public Records Law or the federal Freedom of Information Act, if applicable). This “data mining” is critical to establish the parameters of what an agency or authority has done in the past, how they handled specific issues, and what they can and cannot agree to. In effect, this raises the “floor” from which your negotiations start.
Make it easy for the agency to get to “yes.” Generally, the fewer surprises you provide to the agency or authority, the better. Be proactive about identifying issues and alerting the agency or authority to them – sandbagging is never appreciated. If this is a transaction that was approved by its board up front, agency staff will have limited ability to vary the key terms from what was presented to and approved by their board, so don’t ask them to do it. If there are issues or factual questions that need to be researched during negotiations, volunteer to take the first cut at them since you have access to more resources than they do. In general, if you have information concerning the site (title or survey information, for example), share it with them early.
How would it look in the media? Not surprisingly, agency personnel from top to bottom are very sensitive to the public perception of what they are doing. Don’t ask them to do something that does not meet that standard. They won’t do it and you’ll lose credibility. Instead, work with them to develop a position that will withstand that public scrutiny.
Escalate and use other channels, but only when necessary. Use all of the available multiple channels for discussions and negotiations (team meetings, lawyer-to-lawyer, business person-to-agency staffer, senior business person-to-senior agency personnel, and friendly political figures-to-agency heads). Select the appropriate forum or group depending on the issues you are looking to raise. Be judicious in deciding on what issues and how often to go over the head of your primary negotiating counterpart, since each time you do you lose some capital with them. Always make sure that the same message/request/demand is being conveyed across all of these lines of communication, or else you will be the one later getting whipsawed for making conflicting (and possibly impossibly inconsistent) demands.
Know your “enemy.” Have some understanding of how these deals differ from private development deals. Specifically, have some familiarity with the agency’s or authority’s Enabling Act and how it treats issues like the need for competitive public disposition processes, the tax status of projects built on their land, and whether local zoning, or building codes, or state law apply. Keep in mind that public agencies frequently require private developers to pay the agency’s attorneys, appraisers, engineering consultants, and advisors (often without a cap), in addition to the developer paying its own expenses.
Take a breath. Accept the fact that the pace of these deals generally is much slower than comparable private deals. For one thing, real estate development is not the core mission of most public agencies. Issues that arise and need the attention of other parts of the agency (e.g., environmental experts, engineering experts) will compete with the core mission for the attention of these people.
Don’t risk it all. Remember that the agency or authority always has the alternative of just saying “no” and doing nothing with the property – and they will rarely be criticized for doing that. Yes, they all need the revenue, but since development is not generally their core mission, one more or one less development project won’t make much of a difference to them.
Now, armed with these tips, go out and get something built.
Peter Friedenberg is a partner at the Boston law firm of Sherin and Lodgen and is chair of the firm’s Real Estate Department. Email: pfriedenberg@sherin.com





