NEW CHARDON:
THE DELIVERY OF AFFORDABLE HOUSING
IN DOWNTOWN BOSTON
by
Belinda Walters
Bachelor of Arts
Stanford Univerity, 1982
SUBMITTED TO THE DEPARTMENT OF ARCHITECTURE
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS OF THE DEGREE
MASTER OF SCIENCE IN REAL ESTATE DEVELOPMENT AT THE
MASSACHUSETTS INSTITUTE OF TECHNOLOGY
SEPTEMBER,
1986
@ Belinda Walters 1986
The author hereby grants to M.I.T.
permission to reproduce and to distribute publicly copies
of this thesis document in whole or in part.
Signature of Author
Belinda Walters
Department of Architecture
August 15, 1986
Certified by
LynifeoB.
Sadgalyn
Assistant Professor of Planning
and Real Estate Development
Thesis Supervisor
Accepted by
VASSACHUS I NSTmUTE
OF TEICHNOLOGY
Interdepartmental
in
SEP05 1986
LAm~ '
1
James McKellar
Chairman
Degree Program
Real Estate Development
New Chardon: The Delivery of Affordable Housing
in Downtown Boston
by
Belinda Walters
Submitted to the Department of Architecture on August
for
in partial
fulfillment of the requirements
1986
Development
in
Real
Estate
of
Science
Degree of Master
15,
the
ABSTRACT
This thesis evaluates the potential to merge the achievement
of the
of public policy objectives with private development
New Chardon site, a state-owned parcel located in downtown
Boston.
In June 1986, Governor Dukakis dedicated the 3.1major
acre
site to residential use and announced a
affordable housing initiative.
The critical unresolved public policy choice associated with
development
concerns the distribution
of
development
benefits.
Among the large population affected by the
current housing crisis, who will be the beneficiaries
of
this project?
More specifically, who is the resident type
-- income level, household size and age
-- to whom the
development
will be marketed?
This thesis offers a
framework for decision-making by exploring the
interrelated
issues of public policy and financial feasibility through an
analysis of development options.
The analysis is designed
to direct the Commonwealth in setting housing
policy
priorities for the New Chardon development.
First, the opportunities and constraints associated with the
site are identified.
Second, the
recent decision to
dedicate the parcel to residential use
is placed
in
perspective by examining the value of the Commonwealth's
contribution and the severity of the current housing crisis.
Next, development options corresponding to three different
public policy approaches to income mix are explored for
their ability to satisfy both public policy goals and
financial feasibility criteria:
1) 100%
affordable;
2)50%
market-rate / 50% affordable; and 3)25% affordable with land
value extracted and linked to development of
another
affordable housing site. Fourth, New Chardon's significance
for state-sponsored housing programs is established.
The
thesis concludes by examining the disposition process,
highlighting the Commonwealth's opportunity to shape the
ultimate development through its drafting of RFP guidelines
and the City's ability to impact the final product.
Thesis Supervisor: Lynne B. Sagalyn
Title: Assistant Professor of Planning and
Real Estate Development
2
TABLE OF CONTENTS
List of Exhibits ......................................
4
Overview ..............................................
5
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Chapter 1: Opportunities & Constraints ....
- Government Center Urban Renewal Plan
- Land Disposition Agreement .
.........
- State Service Center ....... .. 0 . . .
- Current Context ............
Chapter 2: The Housing Decision .. . .
- Commonwealth's Contribution . .
- Housing Crisis ............. . .
Chapter 3: Development Options ...
- Housing Economics ..........
- Development Scenarios ......
- Non-Housing Economics ......
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25
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36
43
54
Chapter 4: New Chardon As A Model .....................
59
Chapter 5: Disposition Process ... ..
- Chapter 579 ................ ..
- Community Advisory Committee .
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a
- RFP Guidelines .............
- City's Role ................. .
64
64
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Endnotes ..............................................
75
Appendix ..............................................
76
Acknowledgements ......................................
93
3
LIST OF EXHIBITS
1: Area of Property Map
2:
...........................--
Site Locus Map .........................-.
----...
77
78
3: Government Center Property Map .................... 79
4: Government Center Proposed Land Use Map ...........
5:
80
State Service Center Plan .......................... 81
6: Site District Map ...................................
82
7: Total Development Cost ...........................
83
8: Comparable Sales: Market-rate Condominiums,
Downtown Boston ................................... 84
9: Affordability Standards ...........................85
Sales Proceeds vs. Development Cost
By Unit Type ... .................................
86
11: Sensitivity Analysis .............................
87
10:
12: Garage Operating Pro Forma ....................... 88
13: Non-Housing Operating Pro Forma ....................
89
14: Non-Housing Operating Pro Forma,
Additional Equity Contribution ....................90
15: Non-Housing Operating Pro Forma, UDAG ............. 91
16: Community Advisory Committee Membership
Roster . ..........................................
4
92
OVERVIEW
Governor Michael Dukakis announced
On
June 4,
1986,
major
housing
initiative for
undeveloped
state-owned,
located
The 3.1-acre site,
parcel in downtown Boston.
at
is part of
corner of New Chardon and Merrimac Streets,
the
an
a
a
8.4-acre parcel originally included in the 1960's
urban
A
State
renewal plan for Government Center (Exhibit 1,2).
a
but
built,
Health Center were
Mental
Lindemann
the
was
planned by Paul Rudolph,
The Hurley Employment Security Building and
intended use.
third
a state office tower was never constructed.
component,
New
master
Center,
Service
The
Chardon site has remained highly underdeveloped,
while
it is a
prime
its value has increased enormously.
Today,
urban parcel and important to revitalization of the adjacent
Dedication
area.
Triangle
valuable
downtown parcels to residential
demonstrates
particular,
use
most
dramatically
the magnitude of the Commonwealth's commitment
the
alleviating
to
its
of one of
Bulfinch
to
current
housing
and,
crisis
downtown
affordable housing in
delivering
in
Boston.
delivery
The
site
is
of affordable housing on the
today a vision loosely defined by
press conference remarks:
housing
favoring
the
New
Chardon
Governor's
four hundred units of mixed-income
homeownership
income, first-time homebuyers.
5
opportunities
for
middle
A retail component, day care
center
Since the announcement,
an
the
of
extension
proposal.
the
parking garage were included in
and
as
provision of a shelter facility
as
emerged
Lindemann Center has
a
To promote feasibility, the State offered a land
priority.
cost writedown or favorable lease structure and below-market
rate financing to be funded by its Homeownership Opportunity
Program (HOP) established in early 1985. Sufficiently broad,
the
charter can be translated into reality through
several
development alternatives.
and
in
broadest terms its challenge is to merge the achievement
of
The
public
The
Chardon initiative is bold in concept,
New
objectives with private sector
policy
complex in its
is
project
programmatic
development.
demands
and
intriguing in its possibilities for integrating housing with
the rest of the site.
Critical to success of the venture is
To explore development
making sound development decisions.
and
potential
Executive
Office
of
Division
the
Communities
and
roster
of
local
Capital
with
Development,
convened a Community Advisory Committee (CAC).
impressive
of
in conjunction
Operations (DCPO),
and
Planning
build consensus,
has
The CAC, an
and
representation
the
industry
expertise, will work through the summer to resolve issues of
housing policy, financial feasibility and urban design.
The
guidelines
for
Request
For
output
of
development
Proposals
the
process is to be a set
of
of the site to be included in the
(RFP) to the private development community.
has set an aggressive schedule.
6
Legislation in support
DCPO
of
development is
Chardon
New
the
1986.
early as October,
A developer selection process will
1987,
early
with developer designation expected by
follow
as
filed
projected to be
thereby completing the disposition process.
This thesis approaches the issue of delivering affordable
as
housing on the New Chardon site as the challenge unfolds
policy
public
The critical unresolved
writing.
this
of
choice associated with development concerns the distribution
development
of
household
level,
size
development will be marketed?
--
age
and
to
offers
thesis
exploring
the
financial
feasibility
policy objectives
Together,
Commonwealth
for
framework
and
for
issues of
interrelated
The
options.
a
mix.
will
public
serve
development
of
to
and
policy
the
direct
CAC in setting housing policy
New Chardon development and
the
by
decision-making
through an analysis
conclusions
the
whom
and market forces will be the determinants of resident
This
be
project
whom will the
More specifically, who is the resident type --
constructed?
income
For
benefits.
priorities
ultimately
the
form
basis for legislation.
The
which
the
assessed.
units
and
types
within
analysis is designed to establish parameters
potential of the New Chardon development can
be
The economics of building and selling affordable
on the downtown site are analyzed to expose the
cost
and
unit
benefit of including various resident groups
in
the
development.
7
Based
upon
these
housing
development
economics,
different
policy
corresponding
options
approaches
to income mix
to
are
three
explored.
These scenarios are presented to broadly test the limits
financial
rate /
2) 50% market-
1) 100% affordable;
feasibility:
50% affordable; and 3) 25% affordable with land value
extracted
and
housing site.
linked to development of another
affordable
Each is evaluated for its ability to satisfy
public policy objectives and generate returns attractive
a
of
private developer.
non-housing
portion
Additionally,
of
the economics of
the development are
examined
reviewed for the potential to enhance affordability
to
the
and
through
cross-subsidy of the housing component.
In
with
total,
this thesis relates the challenges associated
disposition and development of the
basis
for
development
decisions
benefits
regarding
and
points
development may eventually take.
New
Chardon
constraints
site,
revealing
site,
the
to
distribution
the
form
that
a
of
the
Chapter One introduces the
its
opportunities
by recounting its history and
current context.
provides
identifying
and
its
The recent decision to dedicate the parcel
to
residential use is placed in perspective in Chapter
Two
by
examining
and
the
value of the
State's
contribution
severity of the current housing crisis in Boston.
Alternate
development options and their ability to satisfy both public
policy
objectives
and financial feasibility
analyzed in Chapter Three.
Chapter Four,
8
criteria
are
synthesizing the
policy
and
directives
earlier
for
thesis concludes
highlighting
ultimate
the
New
presents
chapters,
significance
economic potential
state-sponsored
by
examining
the
established
Chardon's
housing
expected
programs.
disposition
Commonwealth's opportunity to
in
The
process,
shape
the
development through the drafting of RFP guidelines
and the City's ability to influence the final product.
9
CHAPTER 1
OPPORTUNITIES & CONSTRAINTS
New Chardon parcel is one of the largest developable
The
sites in downtown Boston and remains, as it has for the past
a
years,
fifteen
piece
of
Among
business.
unfinished
Urban
parcels covered under the Government Center
fifteen
Renewal Plan, it is one of only two uncompleted projects and
is testimony to incomplete planning.
State
Center,
Service
the
parcel
Originally part of the
a
is
leftover.
Its
development must respond to the uses and structures existing
on
Urban
site and is subject to the original
the
Renewal
Plan.
While the site has remained inactive over the
fifteen
years,
parcel
is
districts
the
situated
and
area around it has
at the
dynamic
on-going or proposed
not.
Today,
juncture
of
development
past
the
several
activity.
Together, its rich history and current context establish the
opportunities
form
the
and constraints associated with the site
a framework for development options.
land
disposition
architectural
implications
legacy
for
agreement
with
the
left by Paul Rudolph
today's
disposition
In
particular,
City
and
have
process
and
the
important
and
urban
design solution.
Government Center Urban Renewal Plan
The site is part of Government Center, a sixty-acre tract
acquired
by the City of Boston under provisions of
10
Federal
legislation
renewal
urban
thirty
approximately
buildings,
Government
(Exhibit
3).
state
federal,
and
Comprised
of
office
city
ambitious
Center is one of the most
and successful redevelopment projects in the country.
Center occupies what was formerly the
Government
of
Settled
Trimount.
in 1630 by John
Trimount was
easy access to river and harbor trade routes.
Boston,
topography
the
safe vantage from Indian attack and
its fresh water supply,
renamed
and
Winthrop
the peninsula was appealing for
Bay Company,
Massachusetts
plains
and by the end of the
century,
18th
its
had been altered to its present form by means of
damming and cut-and-fill operations.
Boston's
earliest hub was the Townhouse,
standing today
as the Old State House. Retail evolved in the Washington and
developed around Broad,
shipping
The
longer wharves.
emerged
State,
as
westernmost
Chardon
size
parcel
Streets.
south
land
of
and
Dock, Scollay
The land between Haymarket,
most of the current Government Center
housing the
a service area,
hotels and restaurants.
the
Franklin and Milk
due to the availability of filled
and Bowdoin Squares ---
district
the
industry gradually moved north and
Market
Quincy
financial
while
vicinity,
Streets
Summer
portion
city's
finest
However, as Exhibit 3 illustrates,
of
is
the tract which
consisted of lots considerably
suggesting residential use.
part of the West End neighborhood.
11
In fact,
the
smaller
this area
New
in
was
business
central
remained the prime social, business and political
district,
until
center
the
to
adjacent
Square,
Scollay
the
early 1870's.
First,
attributable to two factors.
demise
Its
is
largely
The Great Boston Fire
1872 destroyed over sixty-five acres of highly developed
of
including the business district.
land
time
excessive
required
to
rebuild
Largely due to
the
the
the
district,
This movement away
business center slowly edged southward.
hotels
from Scollay Square coupled with the rise of elegant
in the Back Bay, such as the Hotel Vendome, drained vitality
from Government Center.
The second factor was the presence
of the naval shipyard in Charlestown.
to and including World War II,
Boston,
and in time,
A series of wars, up
brought droves of sailors to
Government Center lost its reputation
for luxurious hotels, theatres, and restaurants and became a
center
for
naval on-shore entertainment:
tattoo
parlors,
burlesque theatres and hot dog stands.
Over the years,
and
property
buildings became obsolete and
values
declined.
Though
hazardous
facilities
were
substandard, the area was ideal for redevelopment due to its
proximity
to government/business/retail activity and access
to existing public transit.
Furthermore, its primarily non-
residential character was advantageous.
chosen
1930,
Scollay Square was
as the site for a proposed Civic Center as early
but
little action was taken until the United
Congress passed the Housing Act of 1949,
12
as
States
enabling cities to
effectuate slum clearance.
area was classified as an Urban Renewal
The
Preliminary
Report" was published by a mayoral committee in
1956 and gained widespread support.
new federal,
of
private
several
- A
"Government Center Study
I of the Housing Act.
Title
under
Area
It proposed a
complex
state and city office buildings along with
structures in
the
Square
Pemberton-Dock
area.
In 1960, the Massachusetts Legislature abolished the City
of
Planning
Boston
Board and transferred its
and
powers
duties to the recently formed Boston Redevelopment Authority
Concurrently,
(BRA).
the Government
the Mayor proposed that
Center project be executed as a non-residential,
funded
redevelopment.
With a new city
federally-
administration,
a
newly organized redevelopment authority and necessary public
sector support,
Government Center began to take form.
Pei
& Partners was hired to master plan
and
to
I.M.
Government
Center
coordinate other architects commissioned to
design
individual structures.
In October of 1961,
demolition was
initiated.
Land Disposition Agreement
According
to the land use plan proposed by
I.M.
Pei
&
Partners, the Government Center project area was carved into
fourteen
framed
by
The State development
separate parcels.
the
newly
routed New
13
Chardon
and
parcel,
Cambridge,
Parcel 1
The
Disposition
was designated
Staniford and Merrimac Streets,
(Exhibit 4).
Commonwealth and BRA entered into a land disposition
agreement dated February 2, 1965.
In the Agreement, the BRA
agreed to convey the parcel to the Commonwealth for a
price
of $1.75 million (MM). The conveyance was subject to several
and provisions.
restrictions
for
office and
public
agreed
used
The property had to be
state
the
Further,
institution.
any
not to use the property or any part thereof for
use other than public office and institution.
Consequently,
although a substantial part of the parcel is already devoted
to the uses set forth in the Agreement, the remaining vacant
be used for any other
cannot
cannot
transfer
entity
prior to completion of the building
its
The
in
another
to
interest in the property
the transferee assumes all obligations of the
state
The
purpose.
parcel
project
unless
Commonwealth.
BRA does not enjoy a right of reverter in the
property
These
the event the building project is not completed.
restrictions
terminate
were
placed
as covenants
in
the
deed
on the expiration date of the Urban Renewal
and
Plan
in 2003.1
Subsequent
conveyed
to
to
the
February 10, 1965.
of
the
the execution of the Agreement,
Commonwealth Parcel 1A by
a
the
deed
dated
Parcel 1B consists of a triangular piece
land at the corner of Merrimac and New Chardon on
Langone
BRA
Funeral Home is located.
14
It has
never
which
been
conveyed to the Commonwealth.
Both the Agreement and Deed are subject to the Government
Center Urban Renewal Plan which restricts permitted uses
So, the
Agreement nor Urban Renewal Plan have been amended.
plan
housing
proposed
the
and
documents,
Commonwealth
will
with
proceed
the BRA has a formal
As such,
the development as planned.
several
require
from the BRA Board of Directors to
approvals
existing
with
incongruent
is
usual
for review of the project extending beyond its
basis
authority
to
heightened
role
context
regulate
of
development
Boston.
in
disposition
process
This
discussed
of the City will be further
the
the
neither
date,
To
institution.
and
office
public
to
and
in
political
feasibility.
The
reflect
Land
Disposition Agreement needs to be
amended
new
priorities by deleting the clause
prohibiting
use of the parcel or any portion thereof for any uses
than public office and institution.
must
to
other
Additionally, the Deed
be amended releasing the State from use
restrictions.
Both amendments can be accomplished with the consent of both
parties
to the agreements.
However,
modification of
Urban
Renewal Plan requires further approval by the
City
Council
Development.
public
specify
office
that
and
Unlike
and
Executive
Office
the Agreement,
institution
of
the
as the use
a portion of the parcel cannot
15
Boston
Communities
Plan
the
&
designates
but
does
not
be
used
for
purposes
other
public
once
DCPO and BRA counsel will have to determine if
constructed.
Plan requires amendment,
the
but clearly
simpler if it is deemed unnecessary.
though,
remains
the
is
process
In principle,
as a use has been accepted by all parties.
documents,
been
has
space
office
housing
Amendment of the
a legality capable of tying-up
the disposition process.
State Service Center
The Commonwealth was authorized to purchase Parcel 1
&
1B) by Chapter 635 of the Acts of 1960 which
(lA
established
the
Government
Center Commission as the acquiring
The
Commission
was further authorized to build
entity.
thereon
of
welfare and education service center consisting
health,
a
(1)
a mental health center and state laboratories building;
(2)
an
employment
security building
and
(3)
health,
a
welfare and education building.
The complex was conceived by coordinating architect, Paul
as
Rudolph,
three
separate buildings consolidated into
single shell curling around the site,
in
forming a grand plaza
Of
front of a heavily sculpted tower (Exhibit 5).
three
only two were built:
sections proposed,
Employment Security Building,
Richardson
and
Abbott
governor from 1937-39;
Center,
buildings
The
designed by Shepley
and named for
a
Charles
the
Hurley
Bulfinch
F.
Hurley,
and the Eric Lindemann Mental Health
designed by Desmond & Lord and Paul Rudolph.
The six-story,
opened in 1971.
16
365,500
Both
square
Building
Hurley
foot
out-patient
community
a
as
primarily
functions
Center
Lindemann
257,200 square foot
seven-level,
The
offices.
administrative
and
placement centers
job
office,
Claims
Insurance
Unemployment
the
houses
treatment facility. Specially constructed for the Department
of
Mental Health,
and
it contains special purpose patient
laboratory space.
twenty-four
proposed
The
tower,
called the Health,
to
be
Welfare and Education Building was never
Commission.
off the project by the Government Center
a
Eventually,
overruns
as
Design review problems ensued and Rudolph was
constructed.
Shepley
intended
offices for several state departments and
executive
taken
story
story tower designed
thirty-three
both
by
Bulfinch and Desmond & Lord was approved,
but cost
administrations
halted
spend $43.5MM on the
entire
and
a
change
Authorized
construction.
of
to
the Commission had only $11.5MM left with the
complex,
completed
buildings,
garage and landscaping
two
The
funded.
tower, estimated at $33MM, would have required an additional
$22MM appropriation.
The costs were clearly excessive.
On
a per square foot basis, Hurley cost $52.40, while Lindemann
cost
$84.76.2
respectively,
foot!
In
are
current
dollars,
the
expenditures,
approximately $140 and $230
per
square
To an extent, monumentalism is appropriate in public
architecture
reference
to
but
the
perhaps as Ada Louise Huxtable
structure,
17
"its
drama
may
wrote
have
in
been
overwrought for its purpose." 3
in exposed concrete
expression
textures
a massive showpiece
is
building
The
have
been utilized,
finish is gear-toothed --
Several
concrete
though most of the
concrete
design.
a pattern of vertical flutes whose
The exposed aggregates
forms were removed and concrete set.
form,
flowing
texture and
add
light,
catch
wooden
were manually chipped away after
edges
forwardmost
architectural
of
create
structure's curvilinear
the
A
depth.
sinuous
both
volumes,
recessed and projecting, are suggestive of the swell and ebb
of the ocean.
Curved planes are used extensively throughout
the interior,
reinforcing the motif.
The structure's shape
is said to resemble that of the State of Massachusetts.
both
the
Venice.
for the plaza has been
design
Rudolph's
Piazza
The
Piazza
del Campo and the
San
plaza was planned as a striated,
Marco
designed
only.
Walls
to be stepped back from the central plaza to create
terraced effect.
in
three-level
space extending from a series of great curved stairs.
were
with
compared
a
According to Rudolph, the structures were
to form a specific interior space for
pedestrians
As such, the keynote is the unfinished plaza, not the
missing, focal tower.
In 1975,
Governor Dukakis allowed the Government
Commission to lapse out of existence.
Landmarks
Building,
Commission
denoting
rated
the
In 1980,
complex
a
major significance for its
18
Center
the Boston
Category
II
"sculptural
Capital
1982
of
as a result of Chapter 685
& Operations
Planning
which
of
now under the control of the Division
is
land
vacant
The
the Expressionistic style."
in
exo-structure
placed full responsibility for state buildings in the
Government
Buildings.
State
Office
Meanwhile,
the truncated State Service
Center
of
with the Bureau
area
Center
remains a modern ruin awaiting completion.
would fill a void in the building
Completion of the site
fabric
and
demands
sensitive,
the plaza,
an
more
completion
Through
hospitable than the concrete corduroy.
of
design
yet
structures,
of existing
those
with
urban
Materials and scale must be
otherwise institutional block.
compatible
creative
must be responsibly integrated into
Housing
approach.
a
the development is charged with endowing the
site with the architectural integrity originally intended.
Current Context
The
entire
Staniford
site,
bounded
and Cambridge Streets,
square feet (SF).
square
feet
of the
135,000
square
feet
of land
Zoning is currently B-8,
allowable
FAR of 8.
built
an
Terrain
New
Chardon,
Merrimac,
is approximately
360,000
The Hurley and Lindemann buildings occupy
225,000
to
by
site,
leaving
available
approximately
for
development.
"general business," with a maximum
Highly underdeveloped,
FAR of 1.7.
the
Allowable height is
site
420
is sloped with a grade change of thirty-eight
19
is
feet.
feet
along New Chardon from Cambridge down to Merrimac.
State
vehicles
working hours.
during
DCPO let a parking lot operator's
In 1984,
can
The three-year license
nightly use.
for
license
currently utilize the vacant lot
be
terminated at thirty days notice by DCPO.
The New Chardon parcel is located at the nexus of several
districts and is within the vicinity of on-going or
planned
development activity (Exhibit 6).
Government Center
The rest of the Government Center complex
parcel
to
the south and west.
across
New
Chardon Street,
Uses nearest
be
reconstructed
additional
The
to
include
office
upper floors and retail on the
24-story John F.
the
are mid-rise private
buildings and the Government Center Garage.
to
surrounds
the
site,
office
The garage is
space
on
ground
two
floor.
Kennedy Federal Building is located
behind the private office buildings.
Bulfinch Triangle
Across Merrimac Street,
this enclave of 19th century,
to eight-story brick buildings planned by Charles
is being steadily upgraded for commercial use.
of
development
over
zone.
the
Bulfinch
Over $40MM
investment has been infused into the
past three years,
Rents are currently
$8-10/SF in 1982.4
20
pushing out
its
six
area
mini-combat
at the $18-22/SF level up from
North Station
The North Station area extends from the Boston Garden
the
General Services
new
building
designated
the Charles River and has been
to
westward
(GSA)
Administration
and
a
Commercial Area Revitalization District deserving of zoning
The BRA is currently
incentives and tax-exempt financing.
with
wrestling
two
developer
renovated
arena.
each
an
for
mixed-use complex behind a
office/hotel/retail/garage
or
proposals,
Occupancy of the
GSA
new
building
is
expected in August, 1986.
Two
major
location
infrastructure
projects
were
requisite
of the GSA building in North Station:
to
relocation
of
the MBTA elevated Green Line below ground and
widening
of
Merrimac
line
Street.
Depression
of the
Green
is
expected
by
consumes
nearly three-quarters of the Langone Funeral Home
now
early 1991.
located
therefore,
anyway,
The
proposed
on the development parcel.
that
the
such that,
BRA will have
to
street
It
is
relocate
widening
assumed,
Langone
the matter becomes a non-issue for the
New Chardon project.
Lowell Square
Both the City and Jerome Rappaport,
Charles River Park,
claim ownership of this site.
on-going litigation,
development.
residential
An
developer of adjacent
Despite
the 1.5-acre parcel is available for
RFP with guidelines for
development
a
mixed-income
was released by the BRA
21
in
May,
at
percent of the units are to be available
1986.
Fifty
market
rates, twenty-five percent affordable to
moderate-
income residents and twenty-five percent affordable to lowincome residents.
The project may include an office/retail
component and is subject to a 230-foot height limitation.
West End
The West End,
an ethnically integrated though
dilapidated
neighborhood of some 3,000 families, was razed in the early
1960's
part of the 48-acre West End Land Assembly
as
In its place towers Charles
Redevelopment Project.
and
River
Park, a high-end residential complex. The last phase of the
38-story
project,
Longfellow
Place,
is adjacent to
the
State Service Center.
As previously noted,
the New Chardon parcel prior to urban
renewal was part of the West End, more like it in character
and activity than it was Scollay Square. Boston is saddened
by
the
broad-brush
eradicated
the
traditional
mix
dispersed
old
approach
street
to
"urban
pattern,
removal"
disrupted
of residential and commmercial
a neighborhood of families.
Having
use,
come
that
the
and
full
circle, the State is now planning a residential development
on the site with references
In
general,
residential
to a new Old West End.
development
of
the
site
is
congruent with the City's growth policies for central Boston
as outlined in "Downtown Guidelines" drafted in July of 1985
22
with BRA planning for the immediate
and
staff,
upon the original design,
offer
North
Capitalizing
the development has the potential
Center
a pedestrian link between Government
and
Station through the large block via an existing grand
staircase penetrating Lindemann at mid-level.
the internal plaza is paramount and
open
BRA
several key design elements are considered important
to reinforcing other develpments in the area.
to
Among
area.
space
redevelopment
animation
of
New Chardon,
for
of
the
areas
City.
around
can create a
Lastly,
the
Completion of
retail
base,
desirable
uses
particularly
the mini-plaza at the corner of Merrimac
would enable the complex to more
address the street. 5
23
and
and
successfully
CHAPTER 2
THE HOUSING DECISION
of the New Chardon parcel had been discussed
Development
by
authorities on and off during
state
needs
facility
and
on
the proposals focused
of
most
however,
years;
office
fifteen
past
the
housing
The
opportunities.
state
decision, largely an executive choice initiated by Secretary
Frank
Keefe
the Office of
of
Administration
&
Finance,
represents a fresh approach to the site.
Governor's
The
housing decision was an
one.
expedient
Given the increasingly high level of development in downtown
Boston, the State was facing mounting pressure to act.
course
the
of
the next
several
two
months,
Over
key
state
positions involved with real property disposition were to be
vacated
by
officials with strong
Commissioner Tunney Lee,
Real
Property.
track
records:
Deputy
DCPO; and Director Linda Whitlock,
This changing of the guard along with
the
upcoming gubernatorial election encouraged a swift response.
State
agencies were not clamoring for new central
district
space and,
Meanwhile,
indeed,
priority.
by
no budget had been allocated.
Boston was and continues to be in the midst of a
severe housing crisis,
particularly
business
affordable
and the expansion of housing supply,
units,
Acting progressively,
had become
a
public
Governor Dukakis, flanked
Mayor Flynn and Senate President Bulger,
announced
New Chardon housing initiative on June 4, 1986.
24
top
the
For
develop
given.
a
versus office space is considered
units
housing
to
the decision
of this thesis,
purposes
Yet, probing two issues surrounding the decision helps place
it
in perspective and expose its
State
giving
crisis
And what is the nature of
up?
sparked
that
What is
tradeoffs.
the
In
choice?
the
housing
the
words,
other
in
alleviating the crisis, what is the State getting in return?
Commonwealth's Contribution
Implicit in its housing decision,
the
the State has foregone
opportunity to develop the New Chardon site
offices.
Currently,
state
Commonwealth leases nearly 2.1MM
the
feet of office space in Boston alone,
square
for
cost of approximately $22.5MM.
at an
annual
While much of this space is
for neighborhood services offices, over 1.0MM square feet is
leased
for central agency offices in downtown Boston
agencies
eighty
leasing
percent
approximately
and owned.
Class
B
over 40,000 square
of
the
space.
feet
Leased
accounting
space
thirty percent of total state
for
represents
space,
leased
This downtown space is generally leased in older
or Class C buildings in less than prime
where the State serves as an economic anchor.
as 1981,
with
As
locations
recently
state agencies leased such space for $6-9/SF 6,
lease
costs have risen significantly over the past
years
to over $17/SF today.
but
several
Strong market conditions have
prompted the renovation of many Class C buildings, expanding
25
Class
and increasing the cost of Class B space and reducing
C
Construction of a state office building on
supply.
New
and
space
consolidating
efficiently
leasing,
term
short-
site could have been an alternative to
Chardon
the
controlling cost.
recent state facility planning
More
considered
efforts
site's increased value as a private development parcel.
the
private
A plan was outlined by DCPO which utilized the high
potential
development
space
the
site available for
plan
The
capital appropriation.
without
making
of the site to provide state
private
office
involved
development
requiring
the
space
be leased to the State on a long-term basis at
to
greatly
discounted cost.
assuming
the
developer to include a specified
while
The proposal was
amount
quite
indicated
Disposition
that
a
Agreement.
Preliminary
one million square foot
space
private
at a cost of $2-5/SF exclusive
of
amend
estimates
building could support 200,000-300,000 square feet of
office
a
viable,
a deal could be negotiated with the City to
Land
of
office
state
operating
costs.7
Increasingly
agencies
are
delivered
center
however,
on
though,
for
through
the
most pressing needs of
back-office
more
effectively
construction of a horizontal
a state-owned parcel
centralization
future priority,
space,
of
outside
of
state
operations
Boston.
state office space
becomes
If,
a
the cost to taxpayers of assembling a site
26
comparable to New Chardon will be exorbitant.
In
so that proportionately,
for $1.75MM,
parcel
current
According
new downtown office developments currently pay
the BRA,
$40-50 per FAR Gross Square Foot.8
Discounting the price to
given New Chardon's slightly
$35/FAR GSF
and
the
approximately $656,000.
developable parcel cost
to
8.4-acre
the Commonwealth acquired the entire
1965,
applying
non-CBD
location
land
the allowable FAR of 8 yields a current
value of $37.8MM.
Realistically,
in light of city efforts
to downsize downtown development, the site is unlikely to be
built above an FAR of 4.
Still, the value of the parcel in
office use approximates $20MM.
the
Given
housing
decision,
the
most
appropriate
valuation
of the State's land contribution is its
value
a
in
equivalent
residential
to
use.
The
residual
residual
value
the maximum price a private developer
would
pay
for the site if zoned residential and subject
the
ten percent inclusionary zoning regulation now proposed
by the City.
to
is
only
Under the assumptions of the model detailed in
Chapter Three including market rate sales of $250/NSF and
desired
15% return on sales and assets,
approximates $16.5MM.
of
Boston real estate,
housing
a
the parcel's value
For its contribution of a prime piece
the Commonwealth must
ensure
that
supply and affordability are significantly impacted
on the site.
27
Housing Crisis
characterized
The City is facing a severe housing crisis
by
tight supply and rapidly escalating
in
rents
Boston increased eighteen to
Advertised
price.
percent
thirty-one
annually between 1982 and 1985 and yet, the vacancy rate for
is almost invisible.
housing
rental
This pressue on
the
rental stock is further fueled by the skyrocketing costs
of
the National Association
of
According
homeownership.
to
the
Boston metro area experienced
greatest
Realtors,
the
inflation
of home prices in the nation during both 1984 and
percent.
1985 at a staggering twenty-three and thirty-eight
The
Boston area single-family home
average
price
reached
$144,800 in 1985.
Need is projected to continue to outpace
supply.
expansion is expected to create
Economic
housing
demand of 3,500-5,000 dwellings per year, in Boston over the
next
decade.
constructed,
In
contrast,
converted
or
only
13,000
units
rehabbed
during
the
were
1980-85
period.9
Expansion of the overall housing supply, and "affordable"
units in particular,
government.
of
The
is a major priority for city and state
means to stimulate production is a subject
debate among developers and public
policy
makers.
In
1983, The City of Boston established a linkage program which
requires
square
exaction
developers
of
commercial projects
over
feet seeking zoning relief to contribute
fee
to a trust fund used to subsidize
unit production.
Alternatively,
28
a
100,000
housing
affordable
a developer could build or
renovate
housing off-site at a cost at least equal
to
the
been invalidated
by
the
the
However,
fee.
has
program
Court on grounds that such regulatory behavior
Superior
Recently,
the scope of municipal power.
beyond
an
proposed
zoning
inclusionary
a minimum of
and
parcels
city-owned
would
housing
require a minimum of thirty-five percent affordable
on
ten
BRA
the
which
regulation
is
percent
on
privately-owned parcels.
federal
Affordable housing is categorized by established
guidelines. Specifically, "low-income" housing is affordable
to households earning up to fifty percent of the Boston SMSA
median
income.
to
affordable
"moderate-income"
housing
is
households earning up to eighty
percent
of
Similarly,
than
defined as requiring no more
is
Affordable
median.
thirty percent of household income for housing-related costs
In the current crisis,
has emerged.
and
another group deserving of attention
This group will be designated
represents
households earning eighty percent
the high cost of housing,
require
homeownership
low
stock.
potential
particularly downtown,
the
Due
to
units may
an income as much as 115-130% of median in order to
affordable.
with
of
SMSA median income to ten percent above it.
Boston
be
"middle-income"
Middle income residents,
market,
shut out
drive up rental prices by
and moderate-income residents for
Overall,
there
exists
a
large
of
the
competing
scarce
rental
population
of
beneficiaries of state and city-sponsored housing
29
programs.
this
Chardon initiative's approach to
New
The
widespread
indicate
however,
the
as
characterized
Hospital,
to
be
fully
did,
that proposed housing would
accommodate
middle-income
households
and
moderate
of
needs
yet
Dukakis' press conference remarks
Governor
defined.
phenomenon is
housing
with
dealing
the
"nurses
at
General
Massachusetts
the clerks in Boston's downtown stores and people
who
work for the State and City" who have been shut out
the
downtown homeownership
rental
market.
reasons.
opportunities were stressed for two likely
is
thought to offer more to a citizen
privilege
of
living
in
versus
Homeownership
Ownership
someone else's
the
than
building
supported by the State's Homeownership Opportunity
of
and
is
Program.
Secondly, the pending tax reform bill through its provisions
for a longer depreciable life and loss of tax benefits makes
financing
a
rental project very difficult.
necessary
covenants
to
maintain
long-term
In
addition,
affordability
which would prohibit conversion for many years render rental
housing
imposing
less attractive to a developer.
financing
Because
environment and the political
of
this
momentum
behind the Homeownership Opportunity Program, the preference
for
ownership over rental is considered fixed for
purposes
of this thesis.
Given
the
development
severity of the housing crisis and
value
of
the New Chardon parcel,
30
the
it
high
may
be
argued,
from
housing
should
Instead,
site
an
the
efficiency
a
into
that
affordable
not be built on the downtown site
at
either private office or
suburban
for the buck."
market-rate
affordable
housing
project
in
The New Chardon initiative,
underpinned
--
development
by
the
idea
that
Coyle,
reduces
it
housing
evaluated
parcels
the
is
load
people
more
entertainment
strongly
residential
is
both
highly
a
According to BRA Director,
means
centers.
endorses
central
on
to
transportation
walk
The
downtown
the
to
their
development.
availability
the
system
workplaces
Boston
Chamber
housing.
The
of
BRA
Fort Point Channel area
Nonetheless,
market
forces
of financing programs have largely
the nature of constructed housing.
31
or
considers
and
large
for
by
Commerce
to its downtown planning efforts
the site potential of infill lots,
and
livable
helps keep the streets safe
the
to
"create
Housing adds vitality to the
central city in off-peak hours,
allowing
Rather, it
administrations have been generally quite favorable
downtown, the 24-hour city."10
and
is not
of promotion.
to downtown residential growth.
Stephen
"bang
though,
downtown
for all income brackets --
desirable and worthy
which
thereby providing more
premised upon a theory of highest and best use.
City
the
Proceeds from the land sale might then be infused
construction costs are lower,
is
all.
land value might be extracted by putting
to another use,
housing.
standpoint,
has
vacant
residential
and
the
determined
High downtown site costs
most
restricting
Luxury
are
construction for residential use to
high
expanding
the
such as the Waterfront
areas
amenity
market
with
competition
and
Rental construction has been limited.
and Greenhouse,
Devonshire
the
terms
the
incentives,
and
programs
type.
housing
The two
exceptions,
under
financed
were both
favorable
Without
unavailable.
currently
Garden.
Public
and
been the favored
have
condominiums
office
of
production
public
affordable
housing in downtown is severely constrained.
The
Commonwealth has committed itself to the delivery of
housing.
In
Partnership
(MHP)
affordable
Housing
early
1985,
the
was formed as
Massachusetts
a
public/private
effort to address housing needs and expand opportunities for
affordable housing.
Opportunity
income
Its first initiative, the Homeownership
Program
households
(HOP),
enables moderate
previously shut out
market to purchase first homes.
mortgages
(MHFA),
from
MHP
thereby
years.
For
twenty-five
homebuying
Finance
Agency
are available to middle-income
funds are used for an interest rate
providing a further reduced 5.85%
rate for households of moderate-income.
structured
the
middle-
Below-market interest rate
Massachusetts Housing
currently at 8.85%,
households.
down,
the
of
and
buy-
borrowing
are
Mortgage rates
to increase a maximum of three points over
a project to qualify for HOP funds,
percent
of
the units must
be
at
nine
least
affordable
to
moderate-income households. Long-term affordability of these
32
is ensured by deed restrictions limiting appreciation
units
Also,
resale.
upon
Action
The
to
proposal
a
considering
currently
is
construct
to
developments.
associated with housing
infrastructure
Development
Community
(CDAG) funds is being provided
Grant
legislature
up to $5MM in
an additional $100MM from the budget surplus
contribute
to
the $220MM program.
MHP has twenty-eight projects in the pipeline
Currently,
To date, no disbursements have been made.
for HOP funding.
have represented a geographic and
Applications
entity
development
The size of developments has varied as
mix.
well,
but the majority of current proposals are for projects under
one
units.
hundred
earmarked
package of state housing assistance funds.
Boston
of
part
City of Boston as
the
for
have
funds totaling $35MM
HOP
a
been
$71.3MM
So far, only one
for a project in the
application has been received,
West Fenway area.
Highly
Chardon
in the heart of
visible,
can
be
a
tangible,
downtown
working
Boston,
example
of
New
the
application of the Commonwealth's recent housing initiatives
and a showpiece representative of HOP efforts.
of
these
affordable
steps
and
proof
that
the
State
As a symbol
can
housing especially in downtown Boston,
Chardon development must look good and perform well.
33
deliver
the New
CHAPTER 3
DEVELOPMENT OPTIONS
proposed by the Commonwealth, the New Chardon project
As
is
and
land
contributes
housing for its residents,
affordable
and
expertise
applies
in
buyer-financing
assumes
developer
for
risk
sound
environmentally
that
development
merges
achievement of public goals with private development.
its policy objectives, the State
significantly impact housing supply and
affordability, and in doing so, create a
shining symbol of state-sponsored housing
programs, particularly homeownership
initiatives;
(2)
conclusively demonstrate that affordable
housing can be delivered in Boston, and in
particular downtown, where the obstacles to
effective delivery are greatest;
(3)
equitably distribute development benefits
among the large population of potential
recipients affected by the housing crisis;
(4)
creatively solve the urban design challenge
while respectfully responding to existing
uses and architecture on-site.
key
public
policy
the
Among
foremost seeks to:
(1)
four
a
The product is to be an economically and
reasonable return.
Of
for
exchange
while the
development
State
The
as a public-private partnership.
structured
choices
associated
with
development of the New Chardon site, three have already been
made
- what,
use.
density
how and how much.
Housing is the determined
Ownership is the preferred method of delivery.
is
deemed
appropriate
34
and
necessary,
and
High
an
approximate
number
of
distribution
be
conference,
press
is
is
remains
but even if that is the
the
Governor's
thrust,
policy
are households
For example,
To what
low-income to be accommodated on the site too?
should or must market-rate units be included in
extent
targeted
or both,
Should individuals or families,
development?
for
desirable
objectives
resident
and
that
mix
financial
satisfies
feasibility
there
Should
opportunities?
housing
both
criteria
conjunction with the decisions already made,
the
be
be
Determining
provisions for the inclusion of elderly units?
a
the
middle-income
and
understood from
many issues remain unsettled.
of
It
that
benefits
moderate
inclusion of
homebuyers
first-time
identified.
question is for whom will the development
The
built?
units is
development
The
unresolved.
of
policy
will,
in
broadly define
the nature of the New Chardon development.
Three
profile:
the
parameters
will
mix
within the
shaping the income mix,
household.
will
set
New
Chardon's
affordable
category;
key factors typically defining an
Together,
the
The
this
and
in
the household type in terms of size
policy
objectives and market forces
By
parameters.
income-eligible
evaluating
the
feasibility of various public policy approaches to
mix,
resident
the mix of affordable units and market-rate units;
income
and age,
define
chapter offers a framework for
financial
resident
decision-making.
analysis identifies the basic economics at work on
35
the
and is designed to assist the Commonwealth and CAC
site
setting
housing
policy
for
priorities
the
New
in
Chardon
development.
groups and unit types in the
resident
these
upon
selling
and
building
analyzed
are
to
benefit and tradeoff of including various
the cost,
expose
of
this downtown site
on
units
affordable
economics
the
Initially,
housing
Based
development.
options
development
economics,
corresponding to three different policy approaches to income
50%
extracted
public
with
value
land
another
affordable
objectives
and meet
financial
feasibility
Lastly, the economics of the non-housing elements
retail, day care and shelter --
garage,
reviewed
25% affordable
Each is considered for its ability to satisfy
policy
criteria.
3)
and linked to development of
housing site.
--
and
affordable;
2) 50% market-rate /
1) 100% affordable;
mix are explored:
for
component.
the
In
potential
total,
to
are examined and
subsidize
the
the analysis provides a
housing
basis
for
decisions regarding the distribution of development benefits
and
points to the form that the development may
eventually
take.
Housin
Economics
New
Chardon's
potential
for affordable
production
is
derived from and limited by a basic set of economics at work
on the site.
it
Costs and revenues behave in certain ways, and
is these relationships that fundamentally
36
underlie
the
financial consequences of any resident mix scenario.
Delivery of affordable housing on downtown sites such
is squeezed by the high cost
New
Chardon
The
constraints
developed
area,
regulations,
of
development.
of
operating on a site within
use of
the
and in most cases,
a
densely
building
labor,
union
as
code
high site acquisition fees
Clearly, at this early
combine to create the cost premium.
stage of pre-development, a design scheme for New Chardon is
fluid and construction cost is difficult to ascertain.
mid-rise
project is expected though to contain a high-rise,
possibly
and
townhouse component.
square
$75/gross
The
A hard cost figure
of
represents
an
foot (GSF) is assumed and
average of estimates provided by developers and contractors.
Total development cost for a 400-unit project built today is
or equivalently $114.00/GSF, assuming
estimated at $43.5MM,
zero
acquisition.
costs for site
assumptions
economic
upon
Exhibit 7 presents
the
calculation
of
which
the
development cost is based for the three scenarios.
Potential
revenues
units,
market-rate
affordable
Authority (BHA) units.
estimated
upon
are generated
units
from
and
sources:
three
Boston
Housing
Market-rate sales are conservatively
at $250/net square foot (NSF) if sold today based
comparables in the downtown Boston area
(Exhibit
8).
The pricing of affordable units is based upon an ability-topay
formula
premise
illustrated
in
Exhibit
9.
The
underlying
is that residents are expected to pay no more
37
than
including mortgage,
A
middle-income
a
ownership
of
reach
carry
taxes,
on
insurance and condominium fees.
opportunities.
broaden
Accordingly,
rate
household borrowing at an 8.5% HOP
priced at 2.33 times
unit
moderate-income
costs
housing-related
payment of only 5% is required in order to
down
the
income
gross
annual
of
30%
income.
household
household with a lower 5.5% borrowing
can support a unit worth 2.83 times income.
a
can
A
rate
average
If the
income of middle-income (80%-110% median) purchasers is 100%
of median, then the average eligible income for a 1-bedroom,
middle-income
unit is $25,500 and the average price of a 1-
middle-income
bedroom,
unit
is
Lastly,
$59,349.
the City's
developer may sell a number of units to the BHA,
owner/operator of public housing,
units
which would maintain
rent them at affordable rates to
and
low-income.
The
BHA
would
households
be fully funded
through
Commonwealth's Chapter 705 Housing for Families and
667
Housing
for Elderly programs.
the
Under these
the
of
the
Chapter
programs,
sales prices are set by the Executive Office of
Communities
& Development (EOCD) at levels expected to cover development
limits are $75,000 for a
1-bedroom
and $90,000 and $110,000 for 2 and
3-bedroom
Currently,
cost.
elderly
unit
the
family units.
Table
by
cost
1 below summarizes New Chardon's housing economics
identifying the ratio of sales proceeds
by unit type for each income segment.
38
to
development
The ratios are
As indicated by ratios of
Exhibit 10 in the Appendix.
providing a 43% gross margin,
equivalently
required
development
exceed
proceeds
sales
cost
as
less
Market-
all affordable units are sold at a loss.
than one,
rate
included
an analysis in absolute dollars
by
supported
75%,
by
and are clearly
to internally subsidize the affordable
component.
TABLE 1
SALES PROCEEDS:DEVELOPMENT COST
MIDDLE
MARKET
BHA
MODERATE
0-BEDROOM
-
.71
.78
1.75
1-BEDROOM
2-BEDROOM
.81
.59
1.75
.66
.48
.64
.53
3-BEDROOM
.62
.42
.46
1.75
Average
.77
.51
.56
1.75
1.75
is important to recognize that while development cost
It
is variable within certain limits, affordable sales proceeds
are fixed. The average gap per unit between development cost
sales price for a moderate and middle-income
and
respectively,
of
the
$58,200 and $52,387.
unit
Equivalently, in terms
ratio of sales proceeds to cost,
revenue from
sale
of moderate and middle-income units cover
only
half of development cost.
on
The gap is attributable to
unit
The assumed unit sizes are larger than those of many
affordable
of
the
average
high development cost per square foot as well as large
size.
is,
projects financed by MHFA yet smaller than those
competitive
market-rate
39
developments
downtown.
For
sizes are uniform
of this analysis,
purposes
the
whether
To the extent that unit
unit is market-rate or affordable.
sizes are reduced, the gap between cost and proceeds will be
diminished
However,
sales
affordable
since
per square
sales
market-rate
prices
are
fixed.
upon
foot,
which
returns are highly dependent, will be compromised.
size of the gap increases as the unit
the
Additionally,
type expands from a 0-bedroom (studio) to a
For
3-bedroom.
example, the ratio of sales proceeds to development cost for
middle-income units falls from .78 for a studio to .46 for a
3-bedroom.
is
In reality, the cost per square foot of a studio
greater
than
that of 3-bedroom unit since
the
studio
entails more intensive kitchen and bathroom construction per
square
percent
foot.
As
more
and
average
such,
expands
the
because
$35,000
whereas
increases
an
for
gap
increase
studios.
all
still
units
the
average
median
of
in
the
income
per
cost
ten
than
the
development.
the
additional
approximately
Therefore,
less
increases as
the cost of an
additional person.
number
actually
a 3-bedroom ten percent
cost/NSF
Nonetheless,
a studio may
unit
room
averages
household
$3,000
all else being
for
Of
the
unit
course,
type
distribution
only
each
equal,
of affordable units supportable by the project
as
type
the
will
approaches
the implications are marketing to
all
a
limited segment of the market and creating a very homogenous
residential complex.
40
incentive exists for inclusion of low-income
an
Lastly,
BHA units
the levels on the other affordable units.
exceed
units,
affordable
other
replace
units
BHA
that
extent
the
To
and .56 for moderate and middle-income units.
.51
to
compared
an average sales to cost ratio of .77
provide
do
they
$43,708,
an average shortfall of
creating
cost,
development
the BHA purchase prices fail to cover
Although
units.
667)
(Chapter
elderly
and
705)
(Chapter
family
financial
returns will be improved by cutting losses.
For
instance,
the
moderate-income
unit
generates
a loss of $38,429 compared to sale of a 1-bedroom
sale of a
1-bedroom,
However, at some
BHA unit which creates a loss of $17,625.
aura of public housing
point,
the
market
rate sales.
twenty-four
The
development.
clustered in any one
be
can
705-units
a maximum of
By statute,
achievable
jeopardizes
public
housing
rather than the mega "projects" of earlier decades.
On the
hand,
other
included
in
minimum
a
scattered
small-scale,
promotes
program
one
any
of forty
units
elderly
the
development under
667
must
be
program
presumably to promote a sense of community.
Decisions regarding the distribution of unit types within
New
Chardon
Though
alone.
inclusion
whether
Even
if
project,
not be made on the
will
a
financial
of 705-family units,
basis
exists
incentive
required
it
will
play areas were to
a
remain
41
economics
for
the
the first-order question is
not the development is suitable
or
of
dense,
be
for
built
primarily
families.
into
the
vertical
will
Yards
development.
the busiest in the City during rush-hour.
public
are
schools
high cost of
the
within
reach,
downtown
living
and
the 1970's,
the
children ages 0-19 living downtown declined 21%,
age cohort expanded by 82%
24-34
the
families
private
for
there is little demand
During
lifestyle.
downtown
of
Furthermore,
Even among
school system is problematic.
whom
for
the
of
and
Cambridge and New Chardon are two
streets,
surrounding
non-existent
be
a
number
of
while
the
and the trend is likely to
continue. It will be difficult for the Commonwealth to offer
a quality living environment for families on the New Chardon
site.
Therefore,
include
studios
a
likely
development
and 1-bedroom units along
2-bedroom
with
units suitable for small families with an infant or
older
teenage
child.
will
scenario
perhaps
To the extent that the Chapter
705
progam is utilized, it will fund 2-bedroom units despite its
overriding
preference
market-rate
the
for
larger
family
units.
3-bedroom units should be included
tremendous
A
to
value of views available from the
few
capture
few
top
floors of a high-rise built on the New Chardon site.
Based
upon downtown sales patterns, these units will not likely be
occupied by families.
On the other hand, New Chardon is well suited for elderly
Elevator, mid-rise or high-rise structures would
residents.
accommodate
negative
mobility needs and high density would not be
factor since little utility is derived from
42
a
large
The site also offers a
amounts of open recreational space.
central location easily accessible to shopping,
services.
government
banking and
Lastly, accommodating self-sufficient
elderly residents would not impact design significantly;
in
general, elderly developments include a common function room
reduced
and
with
conflicts
units
elderly
the
inclusion
the
However,
parking demand.
provide
to
goal
of
homeownership opportunities for typically younger first-time
Furthermore,
homebuyers.
in the housing crisis.
caught
others
developments
non-disruptive
The decision
and have been quite popular with communities.
include
to
on
hinges
generational
subsidized
within
Chardon
New
a
cross-
project versus the need to accommodate
first-
the
merits
perceived
The
homebuyers.
time
elderly units
choice
will
of
creating
be
by
tempered
between
enhances
financial
development
affordable
units without
the
feasibility by closing
on
cost and sales proceeds
negatively impacting
the
elderly
financial reality that the inclusion of Chapter 667
units
of
elderly
Subsidized
being
enjoy the reputation of
needs
the
to a far greater extent than have
met
been
the need for elderly housing has
gap
1-bedroom
market-rate
sales potential.
Development Scenarios
The
by
the
income mix scenarios presented below in Table 2 vary
extent
to which they
accommodate
certain
income
segments, but otherwise offer a similar housing package. The
43
housing
prices,
package in terms of sales
eligible-income
summarized
ranges and monthly cost to the owner/occupant is
as Table 3 on the following page.
TABLE 2
INCOME MIX SCENARIOS
I
M IX 1
M I X 2
BHA *
MODERATE-INCOME
15%
35%
25%
MIDDLE-INCOME
MARKET - RATE
50%
15%
25%
10%
-
50%
75%
M
X3
10% Elderly, 5% Family
*
A total of
400 units
are distributed within each income
group as follows: 15% studios, 40% one-bedrooms and 45% two-
family
BHA units are proposed,
If
bedrooms.
units and forty elderly units,
units.
representing 15%
and $125,000 to $237,500 for
units
Affordable
market-rate
ownership units serve a market
segment
with average incomes ranging from $17,850 for one person
for a household of four,
$30,600
of
for
Prices range from $50,580 to $71,220
the development.
affordable
they include twenty
to
units
whereas BHA rental
reach low-income households with income ranging from $12,750
to
$15,300.
average
Stated
monthly
in other terms of
housing
payment
household, for example, totals
1 or 2-bedroom unit,
standards
developed
for
affordability,
a
moderate-income
$445, $480, or $575 for a 0,
respectively.
Since the affordability
in this analysis (Exhibit 10)
44
the
include
TABLE 3
HOUSING PACKAGE
AV E RA GE
P R I C E ($)
S A LE S
Market
BHA
Moderate MiddLe
0-BEDROOM
1-BEDROOM
2-BEDROOM
-
50,580
75,000
90,000
54,200
65,040
E L I G I
BHA
Moderate
0-BEDROOM
-
17,850
1-BEDROOM
12,750
15,300
19,125
22,950
2-BEDROOM
55,390
59,350
71,220
125,000
162,500
237,500
Distribution
15%
40%
45%
I N C 0 M E (S)
MiddLe Market
23,800
25,500
30,600
36,315
47,210
69,000
AV E RA G E
M0 N T H L Y
C 0 S T ($)
BHA-
Moderate
320
380
445
480
575
0-BEDROOM
1-BEDROOM
2-BEDR00M
Middle
595
640
765
Market
1,270
1,650
2,410
NOTES: MothLy cost.includes mortgage, insurance, reaL estate taxes
ad cohdominium fees
Market-rate figures based upon a 20% down payTnt and.mortgage
at 9. % with debt service not exceeding 28% o gross income
condominium
expenses
not,
--
fees
given
that
by owners --
borne
they
are
out-of-pocket
whereas those used by EOCD
financials are predicated upon lower affordable
prices.
Therefore,
feasible,
the
to
the
proposed
extent
that
development
sales
scenarios
supports
do
are
deeper
affordability for its residents than current EOCD standards.
Since the development is in such a preliminary state
the
analysis
several
simplifying
scenarios,
while
is designed to test only
total
been
feasibility,
made.
Across
development cost is estimated at $43.5MM,
achievable
$250/NSF.
assumptions have
basic
and
Granted
market-rate
the
sales
physical
are
projected
product
and
at
marketing
strategy will vary whether the project is 100% affordable or
75%
market-rate.
employed
to
development
However,
test
the
sensitivity
impact
the
project were built and
sensitivity
under
for
can
instance,
be
higher
cost due to higher grade finishes and/or higher
achievable market-rate sales.
if
of,
analysis
Furthermore, estimates are as
sold
today.
Once
analysis can be used to project future
varying
assumptions for construction cost
again,
returns
inflation
and market-rate sales appreciation.
Financial
the
proposed
feasibility
is established by the ability
developments to generate returns
range of normal industry expectations.
of profitability
Sales
(ROS)
within
of
the
Two pre-tax measures
and productivity are targeted:
Return
on
defined as net profit/sales proceeds and Return
46
on
Assets
cost.
(ROA) calculated as net profit/total
A minimum return of 15% on both sales and assets
established
as a benchmark.
the
Company's 88-unit
Druker
overlooking
the
construction,
of
development
Public
By comparison,
luxury
Garden
The Heritage,
condominium
and
is
project
currently
under
is forecasted to earn an ROS of 13.9% and ROA
16.2%.
Since feasibility is being assessed
to private development standards,
mix options are feasible,
affordability
relative
to the extent that income
there will be room for
increased
supportable by the project if undertaken by a
non-profit developer.
Since return is expected commensurate with risk,
be
argued that the New Chardon development can offer
returns
and
minimal,
still compete for investment.
if
affordable
lottery.
sale
any,
site
acquisition cost
may
lower
There will
and
the
Yet,
levels
and
venture.
Given
the
at
Furthermore,
require
scenario
least
smaller,
absorption rates
current
a
15%
less
returns
threshold
established
generated
remains
uncertainty
even higher returns in order to
divergent
a
affordable sales will be at a loss, and the
of market-rate units within a mixed-income project
specifics,
be
entire
component will be pre-sold necessarily though
forecasted
The
it
under
seems
a
of
project
warranted.
each
47
might
financing.
income
are highlighted in a comparative sales pro
Table 4 below.
risky
developers
obtain
at
mix
forma,
TABLE 4
COMPARATIVE SALES PRO FORMA
------------------ INCOME MIX SCENARIO -------------------
Sales Proceeds
Total Development Cost
Net Profit (Before Tax)
Mix 1
Mix 2
Mix 3
$25,858,649
$43,462,500
($17,603,851)
$51,477,299
$43,462,500
$8,014,799
$63,040,703
$43,462,500
$19,578,203
Return on Sates
Return On Assets
-68.1%
15.6%
31.1%
-40.5%
18.4%
45.0%
Equity Required @$8,692,568
NOTE: Mix
MIO%
Affordable
Afforciaa e
Makt/Z
MI
X~A(
e (Linked)
b
Mar t
M ixNO
Mix 1,
market-rate
a
conference remarks.
logically
followed:
project,
affordable
Interestingly, no mention was made
illustrates an extreme.
of
entirely
an
representing
component
in
the
Governor's
press
This scenario frames the question that
were
zero site acquisition costs
favorable HOP financing enough to enable delivery of a
affordable project on the site?
loss.
most
done so at
this scenario fails to to pass
Accordingly,
100%
As the analysis of housing
economics revealed, each affordable unit built is
a
and
the
basic of feasibility tests as development cost exceeds
project value by $17.6MM.
subsidy
demanded
contribution of land,
of
The magnitude of the
the
Commonwealth
additional
- beyond
its
permanent financing and BHA funding -
renders such aggressive affordability infeasible.
48
Mix 2 represents a development in which 50% of the
and
affordable
are
outlined
broadly
corresponds
the
to
units
program
by the City for nearby Lowell Square.
Generating
the proposed
development
an ROS of 15.6% and ROA of 18.4%,
offers returns attractive to a private developer. If elderly
units
were not included,
respectively.
the
returns fall to 13.9% and
16.1%,
Importantly, the analysis indicates that with
assumed income mix,
the housing component can be self-
supporting, not requiring additional subsidy from either the
subsidy
further
Any
remainder of the project or the Commonwealth.
could be used to enhance affordability.
Under the
assumptions of Mix 2, the Commonwealth's total
contribution
approaches $30MM as detailed below in Table 5,
a
comparison
scenario.
of
the
Additionally,
included
as
a
or
HOP
financing
requires
have
early
1986,
the
Chapter
expected
is
price
the
land
under
per
each
unit
is
to
be
affordability
approximately
writedown
representing
The remainder of the contribution, $8.4MM
and
a cash outlay.
$35MM
average
Of the $30MM commitment,
$16.5MM,
opportunity cost.
in
an
contribution
gross measure of the
received in return.
half,
State's
$4.8MM
in
public
As mentioned,
housing
funds,
HOP funds totaling
been reserved for Boston projects,
and
as
$66.6MM and $101.OMM have been authorized
667 and 705
programs,
respectively.
that the New Chardon project will be
these allocations.
If,
funded
It
of
for
is
from
however, funds are depleted by the
49
time
be
the project requires disbursement or monies cannot
reserved,
then New Chardon will require an appropriation of
fresh funds.
TABLE 5
COMMONWEALTH'S CONTRIBUTION
By Income Mix Scenario
---------------INCOME MIX SCENARIO -------------------------------
Land
HOP Financing
TOTAL
Avg. SaLes Price/Unit
It
Mix 2
Mix 3
$16.5
$21.0
$16.5
$8.4
$6.5
$5.8 +
$4.8
-
$4.8
$17.6 +
705/667 Funding
Additional Subsidy
NOTE:
Mix 1
$59.9
$29.7
$12.3
$61,940
$137,290
$157,600
= 0% Affordabl
Mix
Mare I11 Af orgable
=
MIX
(Linked)
Mare / 2 A rd
Mix 3
Average SaLes Price excLudes units soLd to BHA
must be recognized that feasibility is premised
base-case assumptions and that returns are highly
to changes in underlying variables.
to changes in hard cost,
reacts
well as,
sensitive
Total development cost
construction schedule,
interest rates which affect both construction
sales period financing.
as
and
Sales proceeds vary with changes in
market-rate sales/NSF and HOP financing rates.
can
upon
As HOP rates
afford to pay more for a
particular
fall,
households
unit,
thereby closing the gap between development cost
50
and
proceeds and increasing profitability.
sales
For example,
to
while an 8.5% mortgage enables a middle-income household
carry a 1-bedroom unit worth 2.33 times income,
8.0% financing provides for a unit
all else equal,
holding
or $59,350,
worth 2.48 times income, or $63,240.
Returns
cost
construction
sensitive
achievable
and
to
required
of
volatility
maintain
returns
expected
sales.
declines 36% to 9.9%,
ROS
infeasible.
$70/GSF,
higher
Of course,
will
The
profitability.
by
a
sensitivity
Holding all else equal,
if hard cost estimated at $75/GSF increases by $5/GSF,
7%,
in
variation
market-rate
is demonstrated
displayed as Exhibit 11.
analysis
to
construction management and savvy marketing
Assiduous
be
particularly
are
only
rendering 50% affordability
if construction cost can be held to
the increase in returns is no less dramatic and
percentage
Likewise,
of affordable units could
be
a
achieved.
holding all else equal, if achievable market-rate
sales/NSF are reduced 8% to $230 from $250, ROS falls 35% to
10.2%.
In combination, if construction cost is $85/GSF then
market
rate sales must be achieved at a rate of $300/NSF in
order
to maintain viable profitability and the
Lastly,
1989,
for
50/50
mix.
assuming the project comes on-line in the summer of
returns
can be forecasted under varying
construction
appreciation.
cost
inflation
and
assumptions
market-rate
sales
The 20-30% appreciation experienced over the
past two years is not expected to be sustained.
sales appreciation of 15%,
With annual
hard cost can inflate by as much
51
as
11%
annually
profitability.
to
$102.60
without
compromising
On the other hand, if inflation persists at
modest levels, increasing only 5% annually, then sales price
appreciation
rate
need
only register a compound
of 7% to maintain 50% affordability.
that
sales
appreciation
is
expected
annual
To
to
growth
the
extent
outpace
cost
inflation, the project is capable of supporting an increased
ratio of affordable to market-rate units.
Mix 3 illustrates a fundamentally different strategy
the
delivery
value
of
the
the New Chardon land is extracted and
development
applied
of affordable housing in which
residual
linked
of another affordable housing site.
at its minimum,
the development would
for
to
If HOP is
incorporate
units affordable to moderate-income households as 25% of the
total.
area
With
with
the remaining 300 units at market-rate in
high rents,
the development
robust ROS of 31.1% and ROA of 45.0%.
$250/NSF,
the
11).
a
a
With market sales at
for
site and still earn a reasonable return of 15% (Exhibit
If
market-rate sales/NSF were $275,
delivered
anything
With Mix 2,
and
the
developer
cannot
one hundred units come at a cost
equivalently $100,000 per unit.
into
value
afford
to
pay
As
such,
the
of
$10MM,
or
The effect of infusing the
a more suburban project for
52
residual
two hundred affordable units
to the Commonwealth for the site.
additional
$10MM
generate
developer could afford to pay up to $10MM
climbs to $15MM.
are
could
an
which
development
costs
lower
are
would be the delivery of
hundred affordable units.
more
than
one
For example, if development costs
are assumed to be 70% of those on the New Chardon site,
gap
between
bedroom,
development
cost and sales proceeds on
moderate-income
unit
approximates
the
a
2-
$31,000.
Therefore, excluding profit, $100,000 could fund three units
off-site versus one on-site.
for a middle-income,
segments
could
Similarly,
2-bedroom unit.
the factor is 4:1
Additionally, market
not accommodated at New Chardon such
be
housed
Meanwhile,
one
insignificant
by the developer on the
hundred
number,
as
families
alternate
affordable
units,
could be delivered on
site.
not
the
an
downtown
site.
The off-site, linked approach represented by Mix 3 offers
an
efficient
allocation of resources,
if
maximizing
the
total
number of affordable units delivered is
goal.
Undoubtedly, the difficulties of implementation would
be
compounded.
the
guiding
A direct parcel-to-parcel linkage would be
preferable to a housing fund contribution to be utilized
some developer, somewhere, sometime in the future.
by
As such,
another suitable, available state-owned parcel would have to
be
identified.
would
be
causing
Most likely,
the developer of
problems
by
the
the developer of New Chardon
linked
forcing a developer
site,
potentially
designation
early in the disposition process of the alternate
site.
too
A
more fundamental objection to the linked approach is that it
is counter to public policy objectives considered central to
53
New
the
conflicts
delivery
residential
other
affordable
downtown
3 begins to look more
Mix
than
projects rather
downtown
off-site
particular,
with the goal for
development.
high-end
In
initiative.
Chardon
the
like
focal
symbol of state-sponsored affordable housing programs it
is
expected to be.
the economics of the linked approach are compelling
Yet,
particularly the ability to reach families,
and its merits,
will necessarily be debated by the CAC.
Current
thinking,
however, within DCPO and EOCD places primary importance upon
the delivery of units on the downtown site,
precisely where
the
obstacles to affordable housing are greatest.
the
public
affordable
objective
more
like
policy objective becomes
units
holds,
that
affordability
acceptable
on-site.
then
If
level
preeminence
of
that
the ultimate development will
look
likely
with
the
maximization
of
represented
is
the
As such
to
a
by
Mix
be
moving
2.
Fifty
considered
target
a
percent
minimum
toward
Mix
1.
Affordability enhancement will be expected from a variety of
possible
sources
including
developer involvement,
cost
control,
non-profit
creative financing and cross-subsidy
from the project's non-housing component.
Non-Housing Economics
The
proposed
non-housing
portion of
the
New
Chardon
development consists of a garage, retail component, day care
54
center
Parker
the
shelter facility replacing
and
Street
currently operating out of the Lindemann gymnasium.
Shelter
The garage of approximately 500 cars is the most substantial
component
feet
square
of
needs
the other portions combine
as
Current zoning
residents.
.5
requires
parking spaces per
the
spaces,
Currently,
operation.
captive
facility
currently
on-site,
the developer.
own
the
development
potential
the
State,
Assuming 200 resident
public-use
for
accommodating
This
analysis
a
vehicles
by
the State might actually
built by a private developer
fee.
though
or a free enterprise to be operated
Under the former,
garage
site
is unknown whether it will be
it
of
the
unit,
residential
would be large enough
garage
parking
the
governing
marketing realities may dictate more.
30,000
only
intended to accommodate
is
and
for
considers
receiving
the
a
economic
of the non-housing component assuming the
garage
is owned and operated by the developer.
The
ability
positive
Likely,
cash
the
flow
long-term
commercial
the
of
alone
depends
upon
portion
financing
has
the
potential
to
(Exhibit
12).
$11.4MM,
and at the assumed commercial terms,
of
technique.
generate
of
taxes
generate
Given strong downtown parking
revenues
exceeds $1MM.
to
financing will be available only from
lender.
garage
non-housing
approximately
Yet,
$1.4MM based
capital
upon
cost is high,
1986
a
demand,
gross
rates
estimated
at
debt service
This financing cost coupled with real estate
$307,000
create
a
55
pre-tax
deficit
exceeding
$375,000.
Considering the other non-housing components, the
cash flow deficit worsens to approximately $596,000 (Exhibit
13).
The
shelter is likely to be long-term leased by
Department
to
the
of Mental Health (DMH) at an assumed rate
average of recently negotiated state
shelter
and
the
equal
leases.
convenience retail operation are
The
expected
to
fully
subsidize
rent.
Together, the three elements can potentially generate
the day care facility which would
net income in the range of $392,000,
service
flow
but,
pay
once again, debt
and real estate taxes create a net loss.
is desired by the developer,
financing
arrangements
will
then
be
If
clearly
necessary
desired 10% minimum cash-on-cash return,
no
cash
alternate
to
achieve
a
assuming equity at
20% of total development cost.
Several
service
approaches
might
be considered to
requirements including more favorable
additional equity and grant programs.
through
the
effective;
makes
the
potential
use
to
however,
of
contribution
$7MM
8),
a
uncertain.
a
Given
terms,
legislation
garage's
participating
mortgage
an additional
equity
from the deeding of parking
spaces
At a competitive $35,000
per
deeding of two hundred spaces would
gross
been
the
Alternatively,
generated
be considered.
with
IRBs
debt
Tax-exempt financing
pending tax reform
generate revenue,
might be negotiated.
(Exhibit
loan
issuance of industrial revenue bonds has
quite
might
lower
margin
56
of
35%.
If
the
space
generate
funds
were
as
contributed
equity,
debt required would be reduced
reduced
However,
thereby lowering debt service.
$7.1MM,
to
operating income from the loss of two hundred spaces and the
large
sum
of
an
Urban
combine
equity
return
cash-on-cash
unattractive
Clearly,
invested
benefited
(UDAG)
14).
would
A 7.8% cash-on-cash return could
a
from
$7MM
if
investment,
achieved with only a $1.8MM equity
project
an
(Exhibit
of -1.7%
Development Action Grant
improve project economics.
be
create
to
the
(Exhibit
UDAG
15).
Qualification for a UDAG, though, entails demonstrating that
the project is not viable without federal assistance.
Other
grants
Grant
such as a state Community Action
(CDAG)
might
be
applicable,
Development
though
the
facility/
infrastructure would have to be publicly owned.
Public
more
ownership
efficient
eliminated.
negative,
in
Without
but
of the non-housing component might
be
that
be
real
the
estate
tax burden,
cash-on-cash
return
taxes
could
cash flow is
for
component improves dramatically from -18.7%
the
still
non-housing
to -5.2%.
This
impact is understandable considering that real estate
taxes
represent 72% of the shortfall.
As an alternative to public
ownership, a tax abatement or payment-in-lieu of taxes might
be negotiated with the City.
Since the New Chardon housing component is assumed to
be
sold off by the developer, cross-subsidy from on-going lease
operations of the non-housing portion is unlikely.
57
Under a
scenario,
rental
is conceivable that excess cash
it
shortfalls
the garage might be used to fund operating
from
the
whether
owner
were
However,
Commonwealth.
a
private
flow
or
developer
the
if housing is to be sold, then the
likely source of any cross-subsidy will be proceeds from the
of
deeding
required
parking
as
an
spaces,
provided the
funds
are
the
additional equity investment in
not
non-
housing component.
In
the
order to further quantify the economic
non-housing
obligations
will
component,
have
to be
requirements for the shelter.
state
potential
parking
determined
needs
along
with
of
and
DMH
State claims on the site will
emerge from a polling of state agencies conducted as part of
the disposition process. Once such matters are resolved, the
CAC
by
can focus on defining the New Chardon project,
largely
determining a distribution of development benefits
satisfies
both policy objectives and finanical
criteria.
58
that
feasibility
CHAPTER 4
NEW CHARDON AS A MODEL
By making intensive use
of the site's unique history.
this
the State has
underutilized and incomplete site,
opportunity
realize
to
objectives.
This
significance
as
programs,
several
chapter
a
model
because
special
Chardon case is
New
the
Undoubtedly,
important
for
Chardon's
housing
state-sponsored
identifying what is at stake should
thereby
the
policy
public
New
highlights
of
the
project be unsuccessful.
The
parcel
sponsored
housing
development
site
is significant as a location
project
which
because
of
for
the
a
size
could be built on the site.
of
the
Though
the
is smaller than many other surplus parcels
undergone
or
allowable
high
are
in
the
density
process
of
creates the
that
have
disposition,
its
opportunity
delivery of many more housing units.
state-
for
For instance,
the
on the
148-acre Boston State Hospital site,
a mix of uses has been
proposed
component,
including
a
residential
but
the
inappropriateness of high density makes the delivery of more
than one hundred units unlikely.
has
units
the
New Chardon, by contrast,
potential for delivery of two
hundred
and four times as many units in total.
affordable
Other
state
parcels undergoing disposition for which housing has been or
might
be proposed include the Dover Elmbank
School,
Salem
Amory, Lyman School For Boys and Northampton State Hospital.
59
None
of
these
compare
to New Chardon
in
terms
of
the
magnitude of the housing opportunity.
A
strategic audit of state land holdings is necessary to
quantify future prospects.
Property
is
declared
the Office of
Real
attempting to catalog excess property not
surplus
with
disposition.
However,
initiated
the
at
encountered
such,
Currently,
the
a
aim
of
expediting
declaration of surplus
local agency level where
to parting with the
particular
yet
their
must
be
resistance
is
property.
As
latent opportunities for the use of state land in the
provision
of
ascertain.
Meanwhile,
dedication
ability
below-market
of
to
the
New
rate
housing
Chardon
site exclusively
are
hard
to
out
for
the
housing
and
the
stands
to
substantially and positively impact
affordable
housing supply in downtown Boston.
New
Chardon's
measured
delivered
income.
on
the housing
not
only by its breadth
--
but also by its depth
accommodated.
primarily
effect
for
Given
As
proposed,
households
of
the
---
the
crisis
number
of
the range of
upper-moderate
be
units
incomes
development
will
and
the down payment requirement and
HOP mortgage structure,
will
be
middlegraduated
homeownership is generally,
and at
New Chardon as well, only within reach of households earning
in excess of 70% of median income.
on-site,
the
project
Without rental
housing
will be unable to meet the needs
of
lower-moderate and low-income occupants, except on a limited
60
basis through BHA units.
Accordingly, New Chardon would not
offer a model for solving the housing crisis from the bottom
Instead, Mix 2 represents a program of deep subsidy, at
up.
a
cost
$150,000 per affordable
of
select
it
standpoint,
is
extended
From a
of the population.
segment
unit,
public
whether this model
doubtful
to
a
policy
could
be
represents
a
provision
of
widely replicated across the state.
the
Instead,
New
Chardon
In
trickle-down
approach.
homeownership
opportunities
alleviates
rates
initiative
theory,
for
the
middle-income
pressure on the rental
stock,
for lower income households.
households
reducing
In reality,
the city-
wide market is so tight that this effect cannot be
until
a
dramatic drop in rental demand is
landlords.
public
policies
development
and
Nonetheless,
price
and
New
realized
experienced
of
incentives
units
by
Chardon can demonstrate that
that
favor
housing
can make a difference in the number,
range
rental
built.
location,
Furthermore,
it
illustrate a means of integrating a mix of incomes within
can
a
development.
The
New
Chardon
initiative
illustrates
a
means
delivering mixed-income housing that would otherwise not
created by market forces alone.
affordable
housing.
cover
cost
housing
the
has
of
The
the
be
Unarguable is the need for
controversy is over who pays
below-market
units.
clearly emerged as the Governor's
61
for
to
Affordable
top
public
policy
priority.
Commonwealth
is
Chardon's
New
willing
stimulate production.
statement
to contribute
is
the
that
the
resources
to
Under the assumptions of Mix 2,
its
contribution approaches $30MM of which approximately half is
the land writedown.
component
the
is feasible,
developer
contrast,
and
other
inclusionary
from
In return,
at least a 50%
affordable
allowing for a reasonable return to
conservative
programs
such
market-rate
as
linkage
sales.
and
proposed
zoning exact the affordable housing
private
developers
and
ultimately,
By
resources
market-rate
occupants.
Successful
development
of
the New
Chardon
site
will
indicate that affordable housing can be developed in Boston,
and particularly downtown, where the challenges to effective
delivery
costs
of
are
Additionally,
injects
this kind of housing are
high
and
the
work
against
greatest.
project
Downtown
economics.
City's regulatory and approvals
process
uncertainty and delay into the development process,
increasing risk and cost.
The disposition process must be
artfully managed by DCPO,
and City Hall and the State House
must agree on process.
New
If such agreements can be
Chardon may exemplify a situation in which
territorial
battles
are
set aside in the
reached,
bureacratic
interest
of
a
common goal.
Especially now in the wake of dismantled federal subsidy,
a joint effort by the State and City is necessary to contend
62
with
policies
and
are required to enhance feasibility and increase
incentives
housing
Congruent public
housing crisis.
the
production.
demonstrate
the
achievement
of
Importantly,
Commonwealth's
public
policy
New
capability
objectives
Chardon
to
with
merge
those
can
the
of
private development for the purpose of delivering affordable
housing so vital for continued economic expansion.
63
CHAPTER 5
DISPOSITION PROCESS
If
ultimate development is to reflect
the
priorities,
public policy
the Commonwealth must exert
influence
through the disposition process and
RFP.
For once that process is complete,
the
Commonwealth's
control
State's
the
its
particularly
much of
over the project's outcome will
the
be
Having established what the project can be,
relinquished.
is devoted to exploring how
the remainder of the thesis
get there and what might be encountered along the way.
to
The
nature of the disposition process and the role of the CAC in
Critical issues to
the development are examined.
defining
be considered by the State in developing RFP guidelines
presented.
the
City
Lastly,
in
political
shaping
the
New
are
feasibility and the role of
Chardon
development
are
considered.
Chapter 579
The development plan for New Chardon must be tailored
the
and
procedures governing management of state real
disposition
of
surplus
land.
to
property
Management
of
the
Commonwealth's real property is entrusted to the Division of
Capital
Planning & Operations,
Construction Reform Act of 1980.
established by the
This Act,
Omnibus
a response
to
the Ward Commission's report of widespread corruption within
government
in
the
late
1970's,
64
prescribes
an
open
fair
promoting
procedures
with
disposition
process
competition.
Central to the process is the appointment of a
group
advisory
local
to
in
assist
development
setting
Relatively new, the process is
guidelines for the property.
Yet,
still being tested as it is applied.
several parcels
have undergone or are in the process of disposition, and New
Chardon
formally
is procedurally no different except that uses
have
been determined for the site.
The disposition process is codified in Chapter 579 of the
1984.
Acts of 1980 as amended by Chapter 484 of the Acts of
As required, the Bureau of State Office Buildings
the
Office
Executive
of
Administration
&
Finance,
parcel,
needs.
A polling letter to all Secretariats and
of surplus
property,
proposed
to document
any
further
Since the site's use has
development.
predetermined,
solicit
Executive
and in this case, outline
interest in it by state agencies,
the
1986
was circulated by DCPO in June,
existence
their
have declared the parcel surplus to
Chardon
the
the
agency and administrative authority for the New
controlling
Agencies
(BSOB) and
been
the only state agencies likely to claim need
will be the Department of Mental Health requesting a shelter
facility
and
requesting
a
parking
allocation
to
Next,
DCPO
determine that the property is surplus to public
need
accommodate
must
BSOB
state vehicles currently on-site.
by polling city and county governments.
declared his support for the project,
claims on the property for its own use.
65
Since the Mayor has
the City will make no
DCPO can
Having determined surplus status on all fronts,
to
disposition
initiate
As
user.
non-governmental
a
instructed, a Community Advisory Committee has been convened
to
assist in drafting development parameters to be included
in
the RFP and incorporated into
authorizing
legislation.
The
CAC will meet over the course of a few months beginning
in
August
outlining
legislation
legislation
process
1986
October,
in
filed
RFP
scope of the
and
passed
broadly
and
to
expected
Once
year-end.
by
be
the
RFP
accordance with Chapter 579 rules for fair
and
been
has
in
the
Authorizing
development.
terms of disposition is
the
establishing
the
define
to
filed,
DCPO can
initiate
open competition. DCPO has proposed an unprecedented meeting
with
a limited number of developers to
guidelines
one
as
last
reality-check
development
review
they
before
are
released publicly. Participation in the session may serve as
a
prerequisite to designation.
Value of such an
interest.
is dependent upon the elimination of conflicts of
Distribution
process.
the
Lastly,
1987.
the RFP will be preceded by a Request
of
Qualifications
for
Developer selection is projected
a
For
streamline
in order to narrow the field and
land disposition or land lease
be negotiated with the selected developer to
will
exchange
March,
agreement
complete
disposition.
The
get
procedures
bogged-down,
are straightforward but the process
often in the legislature.
66
New
can
Chardon,
though,
Governor Dukakis himself is likely to file
prompt approval.
and Senate President Bulger has given
legislation
the
receive
is well-backed politically and expected to
the
Still, the disposition schedule is
project his endorsement.
proposing developer selection within nine months
ambitious,
To ensure timely disposition,
of the housing announcement.
the process must be prudently sheparded by DCPO.
Community Advisory Committee
The
CAC process is a participatory campaign designed
crystallize
development
public/private
support.
stimulate
and
potential
it is intended
To an extent,
to
to
simulate the marketplace with its competing interests in and
claims
upon
diversity and
committee
offers
business
leaders,
estate
real
sixteen
appointed,
The
site.
the
Comprised
expertise.
practitioners,
strong
awareness
of
commitment
the
City
necessary
disciplines
and
for
to local
the
in
delivery
a
range
of
of
affordable
Elected officials, particularly the Mayor, sit on
housing.
the committee as ex-officio representatives.
the
CAC
concerns,
community
experience
of
design
the
professionals and community group representatives,
displays
member
Additionally,
Boston delegation of the legislature is informed of all
meetings.
A
CAC membership roster is included as
Exhibit
16.
The
purpose
of the CAC effort is to ensure
67
a
feasible
project
The committee will work through
with community aspirations.
a
consistent
standards
to set high development
and
of workshops hosted by DCPO and open as
series
possible
to
the
housing
development
urban
feasibility,
To
concerns.
The agenda
public.
the
heighten
and
opportunities and
design
CAC's
evaluating
includes
financial
priorities,
as
much
legal
neighborhood
of
awareness
design
issues, an Urban Design Ideas Charette will be staged by the
Society
Boston
independently
of
over
conceptual
models
CAC.
work
The
development
review
weekend
to
generate
to
and then present their findings
of the CAC will culminate in
guidelines
by DCPO,
course of a
the
for the
New
work
will
Participants
Architects.
drafting
Chardon
site.
the
of
Upon
these standards will be incorporated
into
the RFP.
RFP Guidelines
The RFP guidelines and,
is
the entire CAC process
designed to elicit development of the New
that
matches
expected
site's
that
political
and economic
by learning as much as
Chardon
feasibility.
possible
site
It
about
is
the
opportunities and constraints and with the aid of an
informed CAC,
for
in fact,
DCPO will be able to qualify the
ultimate quality.
development
The analysis of development
options
presented
in this thesis goes far in establishing
potential
and providing a basis for decisions regarding the
distribution
of development benefits.
68
Yet,
other
economic
policy
by
addressed
and must be
outstanding
remain
issues
the
Commonwealth in its drafting of an RFP.
(A) RFP Strategy
The RFP must provide an incentive sufficient to
at
the best deal possible for the
promote
might
State
and
interest,
developer
substantial
run
with
compliance
RFP
the
process
the
time,
same
The
Commonwealth.
demanding
formally
adopt
well defined guidelines or
approach.
attract
more
a
From the developer's
negotiated,
opportunistic
standpoint,
the certainty of a known quantity is desirable,
yet
the flexibility afforded by the negotiated strategy
is
Either way, the guidelines themselves which
more valuable.
are to ensure the achievement of certain public goals should
be presented as parameters only.
instance,
all
should
An income mix target, for
be set as a range
with the proviso
else being equal more affordability is better.
sensitivity
analysis
illustrated,
returns
that
As
are
the
highly
variable
with only small changes in underlying
As such,
developers may be unwilling to commit to
narrowly
production.
Design
bounded
targets
standards,
stifling
once
the
creativity
community
too,
for affordable unit
can
identify desirable
elements
the ingenuity of developer/architect
disposition
and
upon
process
expertise
of
is
the
complete,
private
which the State is reliant
execution of the project.
69
conditions.
for
without
teams.
it
is
For
the
development
successful
(B) Affordability Enhancement
If the RFP generates widespread response and it is
that
non-profit
control,
of
FAR
site
developer
creative
involvement,
the
housing and non-housing combined --
--
3.0 and increases the FAR for the
cost
include
Interestingly,
and cross-subsidy.
financing
affordability
variety of possible sources
A
enhancement.
selection
key
a
should promote
competition
then
criterion,
program
of affordable units is
number
the
clear
proposed
an
provides
entire
8.4-acre
still far below the allowable maximum of
to only 2.9,
Design schemes that include more than 400 housing units
8.
without
compromising the quality of the living
Additionally,
might be considered.
environment
be
office space might
evaluated as a profit center to improve the economics of the
non-housing component.
the
Maximizing
however,
a
singular
number
of
affordable
goal for the site,
units
and
is
not,
other
among
objectives, achieving a creative urban design solution ranks
highly.
Good
design will not likely come cheap and
the high cost of precedent-setting architecture
cost
constraint
between
looks
might be imposed.
and
affordability
This
must
on-site,
policy
be
given
a
tradeoff
resolved
in
selecting among alternate development schemes.
(C) Financing Arrangements
Does the Commonwealth prefer to retain control of Parcel
1
through a ground lease arrangement or sell the property outright and offer the developer fee simple ownership?
70
While a
executed
as
the last
financing
of
this
be
to
step
in
be
developer
an actual agreement with the
though
both,
even
or,
either
of the land/lease will have
Pricing
arrangements.
formulated,
under
proposals
submit
will
a
the issue could be left open enabling developers
guideline,
to
as
RFP
might be incorporated into the
decision
policy
disposition
the
process.
MHFA
special
bond
project
rating
Current
arrangements.
underwriting
require
likely
will
agency standards limit MHFA to financing no more than 25% of
the
funding
expected
be
would
of
the
at prices much lower than their worth,
loan-to-value ratio
80%,
for 50%
2,
MHFA
units.
The
Mix
Under
are
might be made that since the affordable units
argument
sold
project.
within a single
units
warranting
the
project's
is actually much lower than the assumed
greater
MHFA
participation.
The
matter
should be resolved in principle prior to release of the
RFP
so as to not constrain developer proposals.
(D) Implementation
The sale of units will come long after
the
disposition
Yet, demand for the affordable
process has been completed.
units will be great, and a clear statement of eligibility is
a
necessary.
Undoubtedly,
units
policies
must
Should
former
and
applicants.
children,
favored?
lottery
be
established
the
ranking
or
their
Should downtown workers be
long-term
71
for
West End residents,
be granted priority?
Furthermore,
will be held for
affordability
must
be
and limited equity co-ops should be considered
condominiums
mechanisms
with
along
including
ownership
of
forms
Alternate
maintained.
such
deed
as
restrictions
and
Agreement
and
recovering mortgages.
City's Role
the
subject,
usual
its
This latitude extends beyond
to regulate development in Boston.
authority
New
BRA has a formal basis for review of the
project.
Chardon
Disposition
Land
the
Center Urban Renewal Plan to which the parcel is
Government
to
of
virtue
By
It is crucial
recognize the City's position and heightened
bargaining
power and their impact upon political feasibility.
The City is expected to be a facilitator - promoting
the
Funeral
Home
and
amending
the
by
development
Parcel
conveying
Disposition
1B
to
Agreement
State,
the
and
streamlining
financial
Consequently,
significant
power
the site,
but
resources,
approval.
the
it
City
approvals
is
subject
potentially
to
though the State is sovereign.
it
wields
over the disposition and development
has endorsed the project in principle,
City
the
Land
New Chardon is not likely to be dependent upon the
process.
City's
the Langone
relocating
While the
of
Mayor
how aggressively the
will assert its claim on the final product remains
to
be seen.
The CAC should be the forum for input from the City.
72
Its
Among
recommendation.
Advisory
New Chardon vicinity,
the
guidelines.
design
for
provides
North
Mayor's
an
the Mayor is
ex-officio
As a planning board with outstanding proposals
participant.
in
and
Committee,
Design
BRA
members is a
representative and a delegate of the
Review
End
CAC
the
and
review
was offered to the City for
roster
membership
Since
urban
impact
will
the BRA
Agreement
the Land Disposition
the
BRA approval of any party to whom
State
transfers its interest in the property, the City will have a
attempt
may
and
to approve the developer designation
have
least,
at
The BRA will,
voice in the developer selection process.
to participate in the actual selection process with
DCPO.
It is important for DCPO to position the City by building
make
so
its desires for the site known through the CAC process
that the RFP
providing
will be consistent with
city
smoother approvals process for
a
objectives,
the
ultimate
should
developer. Strategically, the amendment of documents
be
must
The City
through the disposition process.
consensus
late
sought
enlisted
Likely,
general,
priority
the
proposed use were
political
the
development
support
after
to
has
been
decision-making.
City would drive a harder bargain in terms
if
exactions
the process
the City has been party
and
the
in
as
proposed
feasibility
is
enhanced
private
office.
of
New
the
by
the
In
Chardon
overriding
assigned to the delivery of affordable housing
73
of
by
both state and city officials.
If
agenda,
from the BRA is an integral part of the
input
and
if the
particularly,
proposed
CAC's
unprecedented
early involvement of private developers is fruitful, the New
Chardon case can exemplify a dynamic model for real property
disposition.
to
This
enterprising approach can be contrasted
the more static format generally utilized up until
If the process is well executed,
merge
effectively
the
then the product will more
achievement
of
objectives with those of private development.
to
now.
forge such public-private partnerships,
public
policy
The
ability
as demonstrated
by development of the New Chardon site, will be increasingly
vital
to
the
successful delivery
throughout the Commonwealth.
74
of
affordable
housing
ENDNOTES
1. Nancy Sackman, Project Manager and Trudy P. Reilly,
Assistant Counsel, Memo to Tunney F. Lee, Deputy
Commissioner, DCPO and Linda Whitlock, Director Real
Property, 19 June 1985.
"Buczko Requests Construction
2. David R. Ellis,
Halt," Boston Globe, 5 February 1970.
3.
Ada Louise Huxtable, "New Boston Center: Skillful
Use of Urban Space," New York Times, 11 September 1972.
Jonathan Wells, "A Bulfinch Market" The Tab,
4.
29 April 1986, pp. 1, 22.
Telephone interview with Owen Donnelly, Senior
5.
Project Coordinator, Boston Redevelopment Authority,
14 July 1986.
6. Russell Tanner, State Office Space Development
Options: An Analysis of Strategies For Providing Suitable
State Office Space At Reasonable Costs in the Boston Area,
July 1984, Division of Capital Planning & Operations.
7. Tunney F. Lee, Deputy Commissioner DCPO, Memo to
Frank T. Keefe, Secretary Administration & Finance,
2 November 1984.
8. Parcel To Parcel Linkage Program: Interim Report,
undated, Boston Redevelopment Authority, p.63.
9. Alexander Ganz and Gregory Perkins, Boston's
Recent Performance and Prospects For The Future: The
Outlook for Demand and Supply of Office Space, Hotel
Rooms and Housing, 29 March 1985, Boston Redevelopment
Authority, p.7.
To Live in Hub," Boston
10. "Wanted: 'Empty-Nesters'
Globe, 14 October 1985, as quoted in Housing in Downtown
Boston: A Report prepared under contract between the Boston
Redevelopment Authority and Citizens Housing and Planning
Association Inc, April 1986, p.2.
11. Anthony Caner and David Geller, "Sante Harbor: A
Proposed Residential Development for the North Station
of Technology 1985,
Area," Thesis Massachusetts Institute
p. 146.
75
APPENDIX
76
i-0
w
we
k
EXHIBIT 2
SITE LOCUS
--.....
..
6....
EU
46
.......
.. ..-
........
... ..... t ..............
ti=
::*............
......
_
.......
N...........
Nh
78
EXHIBIT 3
GOVERNMENT CENTER PROPERTY
-
/
-ep
.om ffmsu
.
.....
Jnn
.....,...........Do
----..
D"l
vea....b.
EXHIBIT 4
GOVERNMENT CENTER LAND USE
0
Inn/
-
EXHIBIT 5
STATE SERVICE CENTER PLAN
I ~1~
II
03
4f-
..
/
,/
R;1i
STAiFORD
STANMFORD
0,
C,
-4
U,-'-4
-w
(n
-4m
EXHIBIT 7
TOTAL DEVELOPMENT COST
S S U MP T 1 0
A------------------------------------- -------NSF
HOUSING UNITS
NSF
5
Mix
CO0S T (1986)
D E VE LOP ME NT
TTAL
........-...------------------------------------------------------
$0
SI TE ACQUI SI TION COST
$28,593,750
HARD COSTS
SF
Number
Avg NSF
N .SE
Gross
cy
. -
0O
...--------
Arh tect/Eng
InsuCance
Site Premium
381,25
- ------------------------- -- ---
$75.
/GSF
Deve opent Mgmt
Construction Loan
Loan Amount
Interest Rate
cost
5hrd cost
mit rate saes $
-
hrd cost
1081
TDC
months
Term
Avg Out Balance
Points
SaLes Period Cost
1986
451arg cost
50
Per It*
Marieting
CONTINGENCY
$28,593,7
30
SOFT COST
LA,
CQnstruction
3~6
HARDCS
BAdgSu Site
scheduiLe:
00
76F
Loan amt
SOFT COSTS
Architect/Engineer
Survey & Testing
Lega & Accounting
$12,867,188
$1,4
InsuCance
Permit$
Mar Feting
Brok rage
Deve opment Mgmt
$323,660
Real Estate Taxes
Constryction Loan Interest
Financing Fees
$2t23088
Sales Period Cost
$2,173,125
Interest
RE Taxes
Operating Exp
$2,001,563
CONTINGENCY
5% TDC
7% hard cost
Cost/GSF
Cost/NSF
Cost/Avg Unit
NOTES: NSF = Net Square Feet
GSF= Gross Square Feet
TDC = TotaL Development Cost
$43,462,500
TOTAL DEVELOPMENT COST
Soft Cost as % Hard Costs
Soft Cost as I TDC
$
EXHIBIT 8
COMPARABLE SALES:
MARKET-RATE CONDOMINIUMS
Downtown Boston
June, 1986
~AVERAGE
SALES/NSF
PARK NG
SPACE
Charles.River Park;
$200
$35,000
Tremont On The
Common
Boston Common;
Conversion
$225
$25,000
Harbor Towers
Waterfrqnt;
Conversion
$250
$130/mo
The Mariner
.
North End
New Constuction
$250*
$30,000
Four Seasons
Public Garden;
New, Luxury +
$375
$50,000
Rowes Wharf
Waterfront
New, Luxury +
$475
$45,000
DEVELOPMENT
Hawthorne Place
0,
COMMENTS
Conversion
* excluding units with prime water views
EXHIBIT 9
AFFORDABI LITY STANDARDS
MIDDLE INCOME: (80-110% Median)
MODERATE INCOME: (50-80% Median)
APR:
Term:
Constant:
Loan Ratio:
RE Tax Rate:
Mtg.Ins.RateHoe Ins.Rate:
TOTAL COST FACTOR:
COST/INCOME RATIO:
PRICE/INCOME RATIO:
0,
Lfl
Family Size
HH Size
Unit Size
Avg Income
Consant
Cons0.9
Ratio:
0
0
0
UU
Condo Fee Rate:
U.U
P
r
y
RE Tax Rate:
HMtg. Ins.Rate:
Ins.Rate:
He
0
0 0
Co 0 Fee Rate:
0.
APR:
0.0
yrs
0.j6
ULoan
TOTAL COST FACTOR:
COST/INCOME RATIO:
PRICE/INCOME RATIO:
2.83
2.33
SMSA
Median Income
.I....
Unit Size
Middle
Income
100%
Median Income
Afford
Factor
median
Price
Afford
Factor
Moderate
Income
75%
median
Price
EXHIBIT 10
SALES PROCEEDS vs. DEVELOPMENT COST
By Unit Type
Unit Size
NSF
De 11
%NSF'
P
SALES
UNIT
BHA
S%886 NSF
middLe
ti: 1II
00
GA
UNIT
BHA
WM
AVG
($43,708)
N
(G
moderate
(111:
'I
6'i
($58,200)
CO0S T
CEEDS
moderate
0:E1
market
11
n11
P)
middLe
Il2i'
:
market
71
($52,387)
$90,031
EXHIBIT 11
SENSITIVITY ANALYSIS
Table It Impact of Construction Cost
Changes on Mix 2 Returns
Table 2: Impact of Market-rate Sales
Changes on Mix 2 Returns
Construction
Market-Rate
Sales$/NSF
ROS
Cost/GSF
$60
$65
$70
$75
$80
$85
$90
$95
$100
32.5Z
26.81
21.2Z
15.6%
9.9%
4.3%
-1.31
-6.91
-12.6%
ROA
0.81
4.21
7.3%
10.21
13.01
15.6%
18.0%
20.31
22.5%
24.51
26.51
$200
$210
$220
48.11
36.71
26.9%
18.41
11.0%
4.5%
-1.3%
-6.51
$230
$240
$250
$260
$270
$280
$290
-11.27
$300
Table 3: Impact of Construction Cost
Construction
Cost/GSF
$60
$65
$70
$75
$80
$85
$90
$95
$100
& Market-rate
R0A
ROS
0.81
4.41
7.9%
11.4%
14.9%
18.41
22.0%
25.5%
29.0%
32.51
36.01
Sales Changes on Mix 2 ROS
--------------------------Market-rate Sales $/NSF-----------------------------$300
$290
$280
$270
$260
$250
$240
30.4%
24.6%
18.81
13.0%
7.2%
1.4%
-4.4%
-10.21
-16.0%
32. 51
26.8X
21.21
15.6%
9.9%
4.31
-1.3%
-6.97
-12.6%
34.4%
28.9%
23.51
18.0l
12.51
7.11
1.6%
-3.9%
-9.3%
36.2%
30.9%
25.6%
20.31
15.0%
9.7%
4.41
-0.91
-6.31
Table 4: Impact of Cost Inflation & Market-rate Sales Appreciation
38.01
32.8%
27.6%
22.5Z
17.31
12.17
7.0%
1.81
-3.41
39.61
34.6%
29.6%
24.57
19.5%
14.5%
9.4%
4.4%
-0.61
on Mix 2 ROS(1989)
41.21
36.31
31.41
26.51
21.61
16.71
11.81
6.9%
2.01
------------------------------------
Annual
Cost
Inf Iation,
4Z
51
61
71
81
91
101
II
121
Annual Sales Appreciation
51
71
14.9%
18.57.
16.21
13.8%
11.31
12.4%
9.9%
7.3%
4.71
2.01
-0.7%
-3.51
-6.3%
8.8%
6.3%
3.7%
1.0%
-1.7%
91
22.11
19.91
17.67
15.2%
12.8%
10.4%
7.91
5.3%
2.7%
Table 5: Impact of Site Acquisition Cost
Changes on Mix 3 Returns
Site Acquisition
ROS
Cost
0
2000000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
31.11
27.9%
24.71
21.51
18.4%
15.21
12.01
8.8%
5.7%
RDA
45.01
38.7%
32.8%
27.5%
22.51
17.9Z
13.7%
9.71
6.01
87
25.41
23.31
21.11
18.8%
16.51
14.21
11.8%
9.31
6.81
131
15X
28.6%
26.51
24.41
22. 21
20.0%
17.8%
15.51
13.11
10.81
31.5%
29.51
27.5%
25.41
23.3%
21.1%
19.01
16.7%
14.4%
EXHIBIT 12
GARAGE
OPERATING PRO FORMA
Units
Residenti
Parmng A ocatio.
Residentia Month ies
nt Cost
Devel
Cons ruct / space
Hard Cost
0
u
Rates tructyre
a
G
Boston
Tota
gatu
OPERATING PRO FORMA:*
Potential Gross Revenue
o h
ong-Term
Da
Short-Term
D
Nih
Sa rdav/Sundav/Holiday
aren Events
ev
500 spaces
Period/Yr
# spaces
308ays
85
nths
ays
ays
ays
ays
ost
Interest
Term
Rate(86)
$1
Turnover
%
Revenue
W
1
%
10
$1,199,0
Debt Svc
$11,400,00
$9,120
IN
$120888
$1,413,960
Potential Gross Revenue
Operating Expenses @
Real Estate Taxes @
Net Income
Return on Asset (NOI/TDC)
cost
cost
Soft.Cost
Contngenc
Financing
Loan to Value
Loan Amount
$15,0
$7,500,0
$282,792
20%
$27
/$1000 value
Debt Service
Cash Flow Before Tax
Cash-on-Cash Return (CFBT/Equity)
$307,800
$823, 68
$1,199,041
($375 67
-----------------------------------------------------------------------------------------* Revenue and Operating Expense estimates developed
with the assistance of Kinney Parking System, Boston
EXHIBIT 13
NON -HOUSING
OPERATING PRO FORMA
Financing
Rent/SL
Day Care
Shelter
$15,960,0
Loan:Value%
Loan Amount $12,768 0
Interest
1 0%
$1,678,6 yrs
Svc
$17.00
Oprati rg Expense/ SF
Day Care
Sheltere00
$27
RE Tax (per $1000 value)
Vacancy
5%
OPERATING PRO FORMA
Potentia
------------------------$1,885,960
$200
Gross Revenue
e er$7
Garage
$10,000
Vacancy Allowance
$1,875,960
Effective Gross Income
Operating Expense
Retail
Day Care
Shelter
Garage
~
$362,792
'8
$282,7
Real Estate Taxes
Retail/Day Care/Shelter
Garage
$430,920
$1,120
5378
Net Operating Income
$1,082,?4%
Debt Service
$1,678,657
Returh on Asset (NOI/TDC)
($596 402
.
%
Cash Flow Before Tax
Cash -on-Cash Return (CFBT/Equity)
NOTE: Total Development Cost fr Retail/Day Cre
@gnN
ad
t
st a 16
SF.
Re
1
totals $15.96MM
ter
SF, Day Care
EXHIBIT 14
NON-HOUSING OPERATING PRO FORMA
Additional Equity Contribution
From Deeded Parking Proceeds
Rent/SE
Retail
Dgy Care
S elter
Operating Expense/ SF
Retaig
Dgy Care
S elter
RE Tax (per $1000 value)
$
.
$Si
0
Financing
$15,960,0
TDC
Spaces sold
%
Lan:Value
Loan Amount $7,168 0
is %yrs
Interest
Ten
$942,40
De t Svc
$27
5%
Vacancy
OPERATING PRO FORMA
--------------------------------------------------------------
C
Potentia Gross Revenue
Retail
Day Care
$1,525,960
$200,0
Shelter
Garage
$10,000
Vacancy Allowance
$1,515,960
$290,792
Effective Gross Income
Operating Expense
Retail
Day Care
Shelter
Garage
Real EState Taxes
Retai/Day Care/SheLter
Garage
$210,71
$430,920
1307,0
Net Operating Income
Return on Asset (NOI/TDC)
Debt Service
Cash Flow Before Tax
Cash-on-Cash Return (CFBT/Equity)
$794,J48
$942,404
($148,156)
-1.7%
-------------------------------------------------------------------------------------------
EXHIBIT 15
NON-HOUSING OPERATING PRO FORMA
Urban Action Development Grant (UDAG)
Rent/Sf
Retail
U~
eiter
Operating Expense/ SF
Financing
TDC
$
$
$
ui t1
Loan
Interest
Exmount
Retai.eyr
Deft Svc
DyCare
S elter$.0
% s
$942,40
y
$27
RE Tax (per $1000 value)
5%
Vacancy
OPERATING PRO FORMA
Potentia
Gross Revenue
Day Care
Shelter
Garage
$200,$1885960
$1,41'6
$10,000
Vacancy Allowance
Effective Gross Income
Operating Expense
Retair
Day Care
Shelter
Garage
Real E$tate Taxes
Retafl/Day Care/Shelter
Garage
$1,875,960
$362,792
R
O
$282 ,70
Net Operating Income
$430,920
$1,082,g4
Returh on Asset (NOI/TDC)
Debt Service
Cash Flow Before Tax
Cash-on-Cash Return (CFBT/Equity)
$942,404
$139,844
7.8%
-------------------------------------------------------------------------------------------
EXHIBIT 16
COMMUNITY ADVISORY COMMITTEE
MEMBERSHIP ROSTER
ION
NAME
AF F I L I AT
DanieL Taylor (Chairman)
A rew AL essi
Simone Auster
Peter Brown
John detgonchaux
David Dixon
Hill & Barlow
ackstone AptsFo rr W st End Tenant
Commerce
r
Greater Boston h
North Station Susinessien.Association
Commissign
BRA Qesign Reyiew
American Institute ot Architects
Reee Fayde
eruL
B1
Hene i ld
Jose
Bone Heud rer
Marty Jones
WiL am Jones
Isaac Lyumkis
John Marston
Vincent MqCarthy
Jim McNeeLv
A an Pai et
Peter Smith
E X
Real Estate Enterprise Inc.
Mayor's North End Advisory Committee
Housing Economics
Communi ty Inestments Bank of Boston
Cerqoran Mul ins ennlson Co.
Planning Association
C1 izens H using
Mane o
Gotdstein
Boston Trade Bank
& Dorr/Massacbusetts Housing.Partnership
Ha
Archtect/BeaCon Hi L Civic Association
Hwt orne Residents Association
The Cottonwood Company
0 F F I C IO
Senate President
William Bulger
Sal vatore DiMasi
Rayipond Flynn
David Scondras
AD MIN IS
T R AT IVE
Re resentative
.
Ma or
C1 y Councilor
SUPPOR T
Executive Office o A ministration & Einance
lannng. & O ration
Division of Cpita
Development
Executive Of ice o Compunities
Af airs
Environmenta
of
Executice Of ice
Executive Of ce of Human Services
Development
Governor's 0 ice of Economic
Boston Redeve opment Authority
Boston Legsl at ye Delegation
Mayor's 0 Ice of Neighborhood Services
Mayor's 0 fice
ACKNOWLEDGEMENTS
The author greatly appreciates the efforts of the
following people who generously contributed their time
and valuable insight to the development of this thesis.
Division of Capital Planning A Operations (DCPO)
Susan Correia
Thomas Piper
Betty Gardner
Deborah Poodry
Debra Hall
Nancy Sackman
Tunney Lee
Cindy Servetnick
Executive Office of Communities & Development (EOCD)
Ron Bedford
Gail Monahan
Executive Office of Administration & Finance
Patrick Lee
Massachusetts Housing Finance Agency (MHFA)
Frank Creedon
Ray Johnson
Rufus Phillips
Massachusetts Housing Partnership/HOP
Tom Gleason
Boston Redevelopment Authority
Owen Donnelly
Greater Boston Community Development
Russ Tanner
Kinney System
Edwin Crean
Dailey & Dow
James Dow
MIT/Department of Urban Studies & Planning
Bernard Frieden
Lynne Sagalyn
93