Hayward Place isn't a wayward place

by Thomas Keane Jr.
Friday, July 11, 2003

Hayward Place seems a puzzle.

The Boston Redevelopment Authority just leased that parcel of land on Washington Street to Millennium Development, the same group that built the eponymously named Millennium Place, the nearby complex that includes a Ritz Hotel, residences and a Loews theater.

Yet, as City Councilor Maura Hennigan says, ``It doesn't make sense.'' Why, for example, did the BRA lease the property rather than sell? Why choose Millennium's proposed office building over desperately needed housing? And why give the developer up to 10 years to build?

These misgivings stem, in large part, from Mayor Thomas Menino's hands-on style of doing business, one that appears to favor his friends and freeze out his enemies. That in turn has created dark suspicions about the BRA's decision this time around as well.

Yet, after Hennigan and fellow Councilor James Kelly hold their planned hearings on the transaction, here's what I expect they will find: The deal may be complicated and hard to explain, but the city had good reasons for doing what it did.

Thirteen million good reasons, to be precise.

The BRA first put Hayward Place out for bid in the mid-1990s. Right at the edge of the city's grungy Combat Zone, building anything at that site seemed a risky proposition. There were no takers.

But then the Ritz hotel, condos and theater complex came along. The theory behind that mammoth development was that it would be so big it would jump-start revitalization of the entire area. So, in April 2001, the BRA tried again. Still unsure about the strength of the real estate market, the agency simply suggested a minimum price of $13 million.

But the offers that came in ranged higher, up to $23 million. So, the agency switched course. In March of last year, it picked five of the eight bidders for the second round, but told them that the price was now $23 million. Moreover, in October the BRA said it wanted a chunk of that - $13 million - up front. The winning bidder would pay the remainder when construction began - in effect, a lease coupled with an automatic purchase.

Why these changes? Boston was facing severe cuts in state aid. A conventional sale would have had to wait for permitting and other regulatory processes; this way, the BRA figured, it could get some money into the city's hands a lot sooner.

Sure enough, after the BRA designated Millennium as developer, the company in late June handed over a $13 million non-refundable check.

One might question Millennium's sanity in doing so. Boston's regulatory process (environmental review, public hearings, Article 80 review, building permits and so on) is so unpredictable that the company could end up with nothing. But from the city's point of view, it sounds like a good deal.

Still, why an office building? And can Millennium really delay building for as long as 10 years?

Boston has under construction more than 2,000 units of luxury housing within a short distance of Hayward Place. Mark Maloney, the BRA's director, worries that the supply of rich people is running out; the market can absorb only so many high-priced units. If Hayward Place had been designated for residential use, he says, two other projects right in the neighborhood - Liberty Place (with 419 residential units) and Kensington Place (with 345) - probably would have lost their financing.

Moreover, the city earmarked money from the sale of Hayward Place to build affordable housing and an upper school in Chinatown. Many critics (including me) have argued that this is how we should manage housing production.

Rather than building luxury projects with a small percentage of ``affordable'' units, just sell parcels for whatever will get the most money and use the funds to stimulate production of lower cost housing all around the city. That's what the BRA now seems to be doing.

Millennium says it has already begun environmental work on the property. Although the lease has an outside date of 10 years, in fact it requires the company to build within a ``reasonable time.''

That seemingly loose term is actually tightly defined, both in the lease and by state law. Delays are OK if caused by state and local permitting processes, but not at the developer's whim.

By the time the 12-story building opens in 2006 or so (a date that assumes approvals are completed by 2004), Millennium's Anthony Pangaro is betting the commercial office market will have turned, and tenants will be willing to pay the rents of $40 or more per square foot he plans to charge.

Menino and Maloney are both adamant that merit, not favoritism, drove this deal. As convoluted as it may be, Hayward Place makes sense. And once built, with the likelihood that a Saks Fifth Avenue will be located on its ground floor, it will mark another significant step in Boston's reawakening downtown.

Talk back to Thomas Keane at tomkeane@tomkeane.com.