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As what is left of the Central Artery disappears, nearby buildings are gaining valuable vistas. Martignetti Liquors in the North End (left) has more than doubled in value in the past 15 years.
As what is left of the Central Artery disappears, nearby buildings are gaining valuable vistas. Martignetti Liquors in the North End (left) has more than doubled in value in the past 15 years. (Globe Staff Photos / David L. Ryan)

For property owners, parks mean profits

Second of three parts

The $14.6 billion Big Dig is proving to be a bonanza for many property owners directly alongside it, despite their having to endure more than a decade of dust, noise, traffic snarls, construction, and demolition that is just now ending.

According to an in-depth review of City of Boston tax assessing records by the Globe, in the 15 years since the Central Artery tunnel project began, the value of commercial properties along the mile-long strip that this year will become the Rose Kennedy Greenway increased to $2.3 billion, up 79 percent. That’s almost double the citywide 41 percent increase in assessed commercial property values in the same period.

The analysis finds that 29 of the 45 commercial properties have increased in value between 1988 and 2003, the latest year for which data are available. The properties range from some of the city’s tallest skyscrapers to a pastry shop at the edge of Chinatown and a bakery in the North End. Eleven properties more than doubled. Seven grew 200 percent or more.

‘‘That’s amazing, isn’t it,’’ said Richard A. Dimino, president of the Artery Business Committee, a downtown business group that held more than 100 meetings and presentations in the past year to try to ensure that the Greenway becomes a viable part of the city as quickly as possible.

The surge in property values will surprise many people who predicted that it would be 20 years from now before the Greenway became a desirable address, Dimino said. The properties along the edge of the Greenway, he said, will always appreciate faster than those in the rest of the city. ‘‘The finishes of the park space and the new boulevard and the quality of the streetscape will just add to the value,’’ he said.

At the moment, the Greenway itself is a mess. Though work crews will finish taking down most of the elevated highway this summer, key details of what will go where on the Greenway have not been finalized, and several features have been put on hold. Because of political turf battles, it’s also unclear who will manage the land.

Several outside designers don’t think the parkland as currently planned will generate the lively public spaces conducive to creating a grand new urban environment.

Yet, the real estate market is saying that these problems will eventually be resolved and that the Greenway will increase in appeal. ‘‘An awful lot of work has to be done besides planting grass for this to look like anything,’’ said Alex Krieger, chairman of the Department of Urban Planning and Design at Harvard University’s Graduate School of Design. His firm, Chan Krieger & Associates, was hired by Equity Office Properties, the biggest single property owner along the Greenway, to reconfigure sidewalks and the entrance of the Boston Harbor Hotel so it can take better advantage of the parkland soon to open up.

‘‘I would guess a similar survey done four or five years from now would find a much larger increase,’’ Krieger said.

Perhaps most surprising is the fact that parts of the Greenway are developing into residential neighborhoods sooner than anyone imagined a few years ago. That’s due in large part to a quirk in today’s commercial real estate market. The Globe survey of commercial properties and recent real estate sales show that big Boston buildings fetch top dollar, as do high-end condos. Yet, the office-leasing market is weak.

So, developers along the Greenway that originally planned to open as office buildings are looking hard at converting their space to condos instead. ‘‘People looking for residential condos are willing to pay an arm and a leg more to have a park as a neighbor,’’ said William Wheaton, an economist and director of the Massachusetts Institute of Technology Center for Real Estate.

At 80 Broad St., owners Suffolk Companies and Real Estate Capital Partners of New York switched in midstream. Originally the building’s development managers, real estate services firm Spaulding & Slye Colliers, planned to redevelop a historic four-story building by famed architect Charles Bulfinch. The plan was to create a 14-floor office building. But two years ago the developers converted to plans for luxury condos instead, due to be finished at the end of 2005.

‘‘When the traffic disappeared from the Artery, our first sense was the lack of noise. We said, ‘Wow, this could be a great residential community,’ ’’ said Kyle B. Warwick, New England regional director for Spaulding & Slye.

RuthAnn Bowers, who sells real estate on the Waterfront for Coldwell Banker, is seeing rapid changes in condo values. For instance, she said that the gap in price between condos at Harbor Towers facing the water and units facing what is developing into the Greenway has narrowed recently.

‘‘Historically, the water units got better prices,’’ she said. That’s changing fast. ‘‘A lot of my sellers are trying to hold on,’’ she said. ‘‘They want the parks done — they think the values are going up.’’

The Globe analysis focused on commercial buildings directly on the new park corridor. But the impact on real estate goes beyond it. A former Stop & Shop bakery on Causeway Street, two blocks from the North End section of the Greenway, last year was turned into an office building with high-end apartments on the top six floors. Those apartments were quickly sold to a developer who converted them to condos and renamed them Strada234. The assessed value of the commercial property jumped 577 percent, from $5 million in 1988 to almost $34 million.

The Greenway increases came despite a severe real estate recession in the early 1990s followed by years of disruption from heavy construction along the corridor from the North End to Chinatown. The elevated highway is still being dismantled. The resulting canyon that will become the Greenway is beginning to open grand vistas and reconnect parts of the city that have been cut off for half a century.

‘‘You have to get out there yourself and walk, and you realize it’s almost a miracle,’’ said Thomas J. Hynes Jr., president of real estate services firm Meredith & Grew Inc./Oncor, which is selling a State Street office on the Greenway that is being converted to condos.

‘‘The awakening is what’s going to be available on the Artery,’’ Hynes said. ‘‘Buildings are seeing daylight for the first time in years.’’

Between the 1950s, when the elevated Central Artery displaced scores of buildings and sliced off the waterfront, and the mid-1980s, properties along the green steel highway were owned and managed in spite of their noisy location. For many owners, the low-rent, noisy parts of their buildings are at last prime space, some with water views.

‘‘We’re looking at what was a rear door, how to make it a front door,’’ said Robert L. Beal, whose family company has owned the Grain Exchange building, at 177 Milk St., for 26 years. Beal hired architects to reorient the building’s main entrance so it opens out onto the Greenway instead of where it is now, on a side street. He hopes to finish in 18 months.

The biggest increases in value came at two properties that were undeveloped in 1988 but are now office buildings. The value of 125 High St., which opened in 1991 and is now owned by New York’s Tishman Speyer Properties, shot up to $424 million in 2003. That’s an increase of 1,465 percent from 1988.

Two International Place, owned in part by developer Donald J. Chiofaro, is currently assessed at $177 million. It has jumped 702 percent since it was built, the second largest increase.

Assessed values are the dollar figures that the City of Boston places on buildings and land for taxation purposes. Under state law the assessments are supposed to reflect actual market value, and the city adjusts the figures annually.

A look at assessed values offers consistency to the Globe’s analysis. But they are an imperfect measure. For instance, city assessors are required to place a value on a building based on the revenues it could command if fully leased, whereas investors consider both current conditions and future market potential. That difference sometimes explains why assessed values vary from prices developers pay to buy buildings.

For instance, if Two International Place were sold today, it would almost certainly fetch far more than its assessed value of $177 million, real estate executives said. Other properties might sell below their assessed values.

About a dozen of the buildings directly on the corridor have been sold over the last decade. Some buyers made out well, others flopped.

Modern Continental Enterprises Inc., a company affiliated with the Big Dig’s biggest contractor, bought Independence Wharf at 470 Atlantic Ave. in 1999 with the idea of capitalizing on the new piece of the city it was helping to build. The company spent over $100 million to buy and then renovate the rundown office building and turn it into a gleaming 14-story red- and green-glass space.

But the building opened a month after the Sept. 11, 2001, terrorist attacks, right in the midst of one of the deepest officemarket slumps in Boston history. The constant construction and Big Dig traffic snarls directly in front of the building did not help. Unable to get enough tenants, Modern Continental sold the building in 2002 to GE Capital Corp. for $82 million.

Pembroke Real Estate, the real estate arm of Fidelity Investments, made a similar bet that is working out better. In 1997, Pembroke bought 255 State St. for $24.4 million, from Nynex. It’s right on the Artery corridor at Long Wharf. Between 1998 and 2003, the assessed value of the building jumped 59 percent to $38 million. The office building, with two new restaurants on the first floor, could be in one of Boston’s busiest recreational locations in two years, with the completed Greenway parks on one side and the New England Aquarium on the other.

The Globe’s analysis found that the biggest percentage decline of any property was 15-17 Northern Ave., where James Hook & Co. sells lobster and shellfish. The property decreased 65 percent in value since 1988 to $1.4 million.

Hook owners declined to comment.

The second largest decline was at an office building at 199 State St., which was listed in city records for 2003 at about $2.9 million, a decline of 31 percent since 1988. The owner, Peter J. Raimondi III, and his investment company, Colony Group, have occupied the space themselves during the tough recent years while construction went on only a few feet away. The first floor, a former bar, is empty.

Now Raimondi and partners will turn the building into luxury residences on what could be one of the best new addresses in the city, sporting windows that look over an extensive string of parks to Boston Harbor.

‘‘It really highlights the change of use that the Greenway has enabled, from Bclass office building to first-class residential,’’ said Lisa M. Campoli, executive vice president of Meredith & Grew, which is handling the transaction for Raimondi.

The biggest bet on the Greenway was made by Equity Office Properties, a Chicago real estate investment trust that in two big acquisitions in 1997 and 2000 grew far and away into the biggest single property owner. The Globe’s analysis shows the company has property in the area assessed at $252 million, including the landmark Rowes Wharf and three historic buildings at Russia Wharf.

Several years ago when Equity Office Properties executives began putting together redevelopment plans for Russia Wharf, they assumed their new hotel would face the Greenway and they would build condos along the water on Fort Point Channel, where the condos would sell for big bucks.

But the looming Rose Kennedy Greenway reversed the plan. ‘‘We chose to put the residences facing the Greenway,’’ said Maryann Gilligan Suydam, regional senior vice president for Equity Office. ‘‘That was a clear strategy we would be able to market the last opportunity to have downtown living on a beautiful garden in the city.’’

Thomas C. Palmer Jr. can be reached at Globe correspondent Lynann Butkiewicz contributed to this report.

TOMORROW: Chinatown and the North End face big changes.

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