Columbus Center hits another snag

Lease on hold after developer asks for construction delay

Email|Print|Single Page| Text size + By Thomas C. Palmer Jr.
Globe Staff / March 22, 2008

The Massachusetts Turnpike Authority has put on hold the air-rights lease it negotiated recently with the developers of the troubled Columbus Center project - yet another delay in a process that already has taken 11 years.

Although the authority did not specify why it halted the approval process late in the game, the move apparently resulted from uncertainty about the status of state funds that WinnDevelopment and its California partners in the project have counted on.

The developer has asked for the right to delay construction, and the lease would have to be renegotiated to allow that.

Columbus Center is an $800 million hotel, residential, retail, and parking garage project planned for a deck over the turnpike on four blocks, between Clarendon and Tremont streets at the border of the South End and the Back Bay.

The project is already in early stages of construction, even though a plan to provide construction financing fell through last year and no new lender has been found.

"Due to intervening circumstances, the authority is hereby withdrawing its submission," Turnpike Authority private counsel Michael S. Sophocles of Choate Hall & Steward LLP wrote Thursday to the Metropolitan Highway System Advisory Board, which was reviewing the lease that was agreed to just late last month.

While the review by the board and its staff at the Metropolitan Area Planning Council is something of a formality, the sudden withdrawal could cast serious doubt on the project.

The developer, WinnDevelopment of Boston, and its senior partner, the California Public Employees' Retirement System, need "additional clarification on how and when the state funding already earmarked for the project will kick in," said Alan Eisner, a spokesman for WinnDevelopment.

The California pension system invests in real estate but recently balked at a large project in Los Angeles, according to the Los Angeles Times, saying it had spent enough on certain types of real estate projects.

In general, financing large real estate projects has become extremely difficult since the subprime mortgage loan meltdown started last summer.

One of the major recent sources of concern about Columbus Center relates to $20 million in job-creation grants that the developers applied for, and an additional $15 million in MassHousing loans. The state approved $10 million of the jobs money but has not made a decision on the second $10 million.

Critics of the project argue that neither the job grant nor the housing money is appropriate for a project that has as its centerpiece a luxury hotel and condominiums.

The developers maintain they never pledged not to make use of public funds that are available, especially as the cost of the project has risen from about $350 million to $800 million since it was first proposed in 1997.

Turnpike officials said yesterday they have made no decision on allowing a delay.

One state official, who asked not to be identified because he was not authorized to speak about turnpike matters, said the developer asked for a delay of up to a year and a half.

Negotiations over a construction delay could be complicated and prolonged, because the lease required milestones in the construction process and financial guarantees of $270 million that the deck over the turnpike roadway would be completed.

"We remain committed to making sure this development brings economic development and jobs benefits to the Commonwealth," said turnpike spokesman Mac Daniel. "We will not bring it to the board until we are confident it will accomplish the goals of both the turnpike and the state."

The turnpike board had approved the previously negotiated lease and sent it to the advisory board for review. It then would have gone to Governor Deval Patrick to be signed.

The Turnpike Authority has not yet acted on the revised lease.

Thomas C. Palmer Jr. can be reached at

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