The Curse Of Too Much Value, Part 2
The story so far can be found in Part 1.
Enter the Federal government, in the person of long-time Congressman and Anthony Athanas friend John Joseph Moakley:
Everyone called him “Joe Moke”
Moakley, whom I met a couple of times, was a politician of the old Tip O’Neill school: well-intentioned, savvy, constituent focused, married to politics (a lifelong frumpy bachelor). He persuaded the Federal government that its new court house should be located on a world-class site: a slice of the Fan Pier. It was built in 2001 and opened just before Joe Moke died (on the job to the last!) on
The courthouse defiantly plants its foot across the Fort Point Channel.
Today the courthouse is named for him.
Fan Pier is near the John Joseph Moakley Federal Courthouse and Anthony’s Pier 4 restaurant. It is also close to downtown and the new convention center, which opened last year.
I’ve been in that courthouse a number of times, for expert-witness depositions. It’s spectacular from a distance, striking within its atrium … and godawful as office space. (These are related, of course, which is why architects always work for actual builders who provide the necessary common sense.)
Though the Federal government moved into the marginally economic space, the Nineties were not kind to
But as other nearby projects got done, Fan Pier continued to defy development efforts, through several economic cycles.
The Curse Of Too Much Value. Had Fan Pier been perceived as cheaper, it would have been developed ere now.
It’s been estimated that it will cost $1.2 billion to develop the [3,000,000 developed square foot] site.
$400 per square foot. (For you Euros, that’s €3,500 per square meter.) The mind reels.
€3,500 per square meter!
The cost of building on waterfront land and the public amenities any new owner would be required to provide have made potential buyers leery of paying too much for the property. Already underway on the site is the construction of a new home for the
Here again looms the Curse Of Too Much Value. It lures the government into squeezing too much rent for its approvals, and when the numbers once again retreat (as cycles always do), the bountiful promises have to be retraded downwards … which nobody likes and therefore take twice as long as they otherwise would.
Earlier this year, Menino grew impatient with what he saw as a lack of progress. In June, he threatened to challenge the Pritzkers’ development approvals for the site in an effort to spur action.
If the city were able to rescind those approvals, the Pritzkers or another developer would have to spend several more years and millions of dollars to get permission to build on the land.
As the government giveth, so the government can taketh away … and suing the government is an extreme recourse reserved for special occasions. But actually rescinding approval would also hurt the city, which would lose all those keen free public amenities. So the threat was stronger than its execution, but did its job of stimulating the Pritzkers to shit or get off the pot.
Re-enter the Curse Of Too Much Value. Each time someone buys a development property, the cost to recoup rises. And people really don’t want too sell at a loss. By now the site was carrying baggage from the Carpenter purchase, the Athanas settlement, the Pritzer sunk costs, and the promised free amenities. So the strike price — the price at which the owners would sell — was very high:
Last year, two teams of potential buyers — one led by Karp, another by Miami home builder Lennar Corp. – made preliminary offers of $125 million to buy Fan Pier. The deals fell through when the buyers reportedly concluded the price was too high. The Lennar team, which included LNR Property Co., made a subsequent offer of $100 million.
Yesterday, in a statement, David Hall, an LNR senior vice president, made reference to what Fallon and MassMutual have apparently agreed to pay for Fan Pier. ”Fan Pier is a great opportunity, and we wish the winning bidder well,” Hall said. ”However, LNR was not going to go to that price.”
Sometimes the best deals are the ones you don’t do. For the Pritzkers, however, it was sell or lose, and eventually they got an acceptable price, from a group that looks from a distance to be the best buyer, as they are already heavily invested in the area:
A partnership made up of
So Anthony comes full circle.
Fallon is part of another team developing a Westin Hotel next to the Boston Convention & Exhibition Center in
How much is The Curse Of Too Much Value today?
The statement did not mention a purchase price, but people involved in the sales negotiations said it is $115 million, about $10 million less than preliminary offers for the property the Pritzker family accepted last year.
The sale for the 20.5-acre Fan Pier site is expected to close by the end of September.
Future-tense verb, that.
$5.6 million an acre. (For you Euros, that’s €11,400 per hectare, or €1.14 per meter.) For undeveloped dirt! Yikes!
Meanwhile, changing market conditions have also changed the property’s probable use and the sequence of development phases
Given the strength of the housing market, and the relative weakness of the office market, it was expected that a developer would proceed with residences first.
A conditional future-tense verb, the height of uncertainty.
”Today’s announcement ensures that Fan Pier will finally become a reality,” Menino said.
A national-class developer has had the site for sixteen years, twelve of them when it had permits and after enduring innumerable debates, and this announcement — to sell to somebody else — means it will become a reality?
In a statement referring to Fan Pier’s buyers, Pritzker said, ”We have been assured they will keep Hyatt’s commitments to make Fan Pier a development Bostonians can be proud of for generations.”
O, those future-tense verbs …
