News for the Hospitality Executive
|By Thomas C. Palmer Jr., The Boston Globe
Knight Ridder/Tribune Business News
Dec. 19, 2003 - After long-stalled efforts to build a $1.2 billion hotel, office, and housing complex, Hyatt Development Corp. wants to give up and sell the 21 acres of Fan Pier on the South Boston Waterfront, according to chairman Nicholas Pritzker.
A short walk from downtown and the city's new convention center, Fan Pier has been the object of development dreams by former owners and several Boston mayors for two decades. But no one has been able to get the project off the ground, leaving the site largely undeveloped and one of the biggest parking lots in Boston.
In a rare interview by telephone, Pritzker said the company on Monday will begin looking for an agent to help it market all or most of the property to a development company experienced in mixed-use projects. Pritzker initially proposed a mixed-use project with a hotel as the centerpiece. But as economic cycles changed, and the company went through the city and state's arduous approval process that began in 1999 and ended last year, the emphasis shifted to more housing, offices, and commercial space.
"The economics of the situation today suggest the hotel is not the primary piece," said Pritzker, whose corporation operates three hotels in the Boston area.
Mayor Thomas M. Menino, whom Pritzker briefed on Wednesday, said yesterday he believes the sale of Fan Pier to a large development company could speed up construction in the city's last development frontier.
"This is good news for us on the development of the waterfront," Menino said. "The Hyatt organization has given us commitments we need. Other developers could come in and try to negotiate. Whatever is part of the deal now is going to stay in place."
Pritzker had already committed to building two public parks, a new home for the Institute of Contemporary Art, a gateway to the Harbor Islands, 1,700 feet of Harborwalk, and a waterfront public pavilion. He said any buyer would have to agree to follow through on those plans. Construction is still scheduled to begin on the ICA next year.
"My thought now is to expose the entire development plan to a rather select group of developers who have the capability of developing all of it on an expedited basis," Pritzker said.
The sale of Fan Pier could affect the fortunes of neighboring landowner Frank H. McCourt Jr., who recently said he also was looking for a co-owner or buyer to develop his 25 acres, now used mostly as parking lots. McCourt is trying to raise money to buy the Los Angeles Dodgers baseball team and related real estate for a reported $430 million.
"If too much is on the market, it brings down the price for everything," said one Boston real estate executive, who asked not to be identified.
Pritzker said he did not know how much the land is worth but hoped that an experienced broker or agent would help determine that.
"We have no preconception of what the price or the terms will be," he said. "We intend to approach it with a very open mind."
One Boston real estate executive estimated the land, now fully permitted, is worth $150 million to $250 million.
But Pritzker emphasized that the sale is not an auction.
"It doesn't depend entirely on price," he said. "We're not going to select any organization that is not fully committed to the commitments we've made to the city and that isn't capable of achieving the highest quality."
Pritzker said he hoped that a Grand Hyatt, already approved for 650 rooms, could be built at Fan Pier, but he did not know if it would fit in with a new developer's final plan.
"We'd certainly like to have a role in a hotel -- it's near and dear to our heart," Pritzker said.
Hyatt officials who asked not to be identified said that they were in talks with two major development firms that would have the expertise and ability to complete Fan Pier as it is now proposed. Neither they nor Pritzker would name the contenders.
However, names that have been mentioned as possible investors in McCourt's site nearby are Related Companies LP of New York, New England Development of Newton, Hines International of Houston, Texas, Forest City Enterprises Inc. of Cleveland, and Tishman Speyer Properties of New York.
Tishman Speyer had been negotiating a $400 million deal with Boston Wharf Co. for dozens of old loft-style buildings in the nearby Fort Point Channel, but the deal recently fell through.
After years of trudging through the approval process with the help of development manager Spaulding & Slye Colliers, the Fan Pier project won its final permits in June of 2002. But financing a hotel in the current market has been difficult and there is no immediate demand for office space.
The expense of building on a raw, land-filled site next to the water, with no utilities in place, has deterred construction there, except for the J. Joseph Moakley Courthouse, completed five years ago on the edge of the pier closest to downtown.
Pritzker said the tough market was one factor in the decision to put Fan Pier on the block, because it has made financing difficult. But he said the notoriously rocky and expensive process of winning development approvals in Boston did not influence the decision.
"It's a rigorous process so far, but a good process," he said. "It's been a tough process but a fair one, honestly."
He said he hopes to be negotiating with buyers within a couple of months and wants to reach an agreement by mid-2004, though that timetable is not certain.
"It may be the greatest urban site in the country," Pritzker said. "The question is, what's the best team to implement the plan right now?"
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(c) 2003, The Boston Globe. Distributed by Knight Ridder/Tribune Business News.