Still standing, but he's not standing still
With his problems behind him, developer prospects for projects
Donald Chiofaro, chief executive of Chiofaro Co., is best known as the owner and manager of International Place, the two downtown Boston office towers he built in the 1980s. A year ago, he filed for bankruptcy to fend off a bid by Tishman Speyer Properties of New York to take over the 1.8 million-square-foot complex by purchasing Chiofaro's debt on it. In January, the case was settled when US Bankruptcy Court in Boston allowed Prudential Real Estate Investors Inc. to partner with Chiofaro and buy out Tishman's interest. Chiofaro says that as one of the only developers left in Boston who still owns and runs a major office building, he has a big stake in the city's future. Today, the 59-year-old Belmont native is prospecting for new projects. Here's his edited conversation with Globe correspondent Susan Diesenhouse.
Q. Were you hurt by the settlement that left you a 10 percent stake in International Place, down from 40 percent?
A.We've never been in a better place. I had to fix my problems at International Place or I'd be living under a bridge. We had very little equity and almost all debt at 8 percent interest; now we have 40 percent equity and 60 percent debt at 5 percent interest fixed for 10 years. It was a roller-coaster ride, and I was terrified that someone would try to take advantage of me at the last minute. Also, there was so much controversy over this that I wanted to show we could be good institutional partners. It wasn't the best deal economically, but I can establish a relationship with [Prudential] that allows us to be successful at International Place and do future deals together.
Q.What are you looking for now?
A.We want an old-fashioned ground-up deal that we build and own. . . . It will probably be a big, phased project; $100 [million] to $500 million. It could be an office or life science lab in Somerville, Medford, or on [Interstate] 495. . . . If it's in Boston, it couldn't be ready for five years, when the market comes back. We're also looking at industrial and maybe a hotel/condo or pure multifamily residential in an urban location.
Q.With your legal battles, have you fallen behind other local developers building in the hot residential market?
A.There are residential developers in town with tremendous track records. I'll see if I can catch up without making too many mistakes.
Q.What are the weaknesses of the Massachusetts market?
A.We need to lock down a position in life science and high-tech manufacturing. True, it's difficult to permit new projects. But that can be changed.
Q.How will the rising cost of construction materials affect your plans?
A.We want to build well-located, well-capitalized, high-quality buildings. But the companies that built the last generation of complex granite buildings were lost in the 1990s real estate depression. For us to do another International Place would mean getting a rent of $70 [per] square foot.
Q.With rents falling to an average of about $33, could that ever happen?
A.Yes. The law, accounting, [and] financial service firms that should be in the Financial District can afford it, and investors now see real estate as a serious asset class.
Q.How badly will offshoring hurt downtown offices?
A.It's a concern. I've heard that in 2004, US cities lost 100 million square feet to offshoring. We have to concentrate on keeping tenants. But as a research center, Boston innovators need business services. With more people moving downtown, they'll want offices here. They need personal contact to structure deals.