© Copyright 2004 Globe Newspaper Company
published in The Boston Globe, 8/7/04
Nearing the finish
Pritzkers seen picking top bid for coveted Fan Pier site soon
By Thomas C. Palmer Jr., Globe Staff
Developers competing for the coveted, but expensive-to-build-on, Fan Pier site on the South Boston Waterfront are nearing the finish line, with two experienced Boston-based groups among the front-runners.
Fan Pier owners, the Chicago-based Pritzker family, and their brokers are expected to decide soon who has made the best offer for the 21 acres already permitted for almost 3 million square feet of development. A ''best and final offer" round of four bids was accepted last week, and the owners are poring over them.
John B. Hynes III, representing Gale Co., one of several large development firms that considered making a bid but in the end backed away, said yesterday he expected the property to bring about $125 million.
''We heard the pricing was coming in north of $115 million to $125 million, so why play?" Hynes said. ''It's a very expensive acquisition to carry. You're not going to build the whole thing out at once."
But two teams with strong Boston connections are after Fan Pier, real estate executives with the competing groups confirmed.
Shopping center creator Stephen R. Karp's New England Development of Newton is teamed up with Prudential Center owner Boston Properties, the Related Cos. LP of New York, and Boston developer Joseph F. Fallon. The other local team among four finalists is made up of Fidelity Investments real estate arm, Pembroke Real Estate, and John E. Drew, who together pioneered South Boston's waterfront with the World Trade Center in the mid-1980s.
''What you have here is two real companies that have performed, that have the financial capability to do the deals going forward," said David I. Begelfer, chief executive of the National Association of Industrial and Office Properties. ''They're going to pay what they can afford for this opportunity. They both want this property."
Others still interested in the property, according to real estate executives involved, are Lennar Partners of Newport Beach, Calif.; and a team including Leggat McCall Properties LLC of Boston.
Hynes and Begelfer agreed with others in the industry that the relatively high price that is expected to be paid for the site will mean development sooner rather than later -- on a site that has sat fallow for decades.
Tom Alperin, president of National Development of Newton, said his company studied the site but chose not to put in an offer. He said he also expected a price in the range of $120 million to $125 million. Alperin said he expected that the buyer would build the site as permitted, with a heavy emphasis on residential, rather than taking the time to alter its permits and change uses.
Real estate executives involved in the bidding process for the Pritzker family, which put the land on the market in the spring, would reveal little. ''There's plenty of interest," said John P. Fowler, executive managing director of of Holliday Fenoglio Fowler LP, which is marketing the property. ''We're processing the offers, talking to people."
The process is expected to wind up in the next few days, followed by signing of a purchase and sale agreement for what is arguably one of the best large development sites in Boston.
''It's the best real estate in the Northeast," said Hynes.
Initial bids came in not too far above $100 million, according to people who watched the bidding closely. The numbers apparently rose in the second round, as they usually do.
The Fan Pier site is fully permitted by state and city authorities for various uses, including residential, hotel, office, and some retail.
During an arduous approval process, the owners also agreed to provide a wide range of public amenities, such as a Harborwalk section along the water, parks, a marina, and on-site contributions to cultural institutions like the Institute of Contemporary Art, all of which contributed to the expense and complexity of the site's development.
Contributing to the difficulty of the site is the fact that it is on filled land next to Boston Harbor, and a huge ''bathtub" of underground infrastructure has to be constructed, for foundations, utilities, and parking for the entire site, before the various parts of the blocks and buildings can be started and generate income.
The site has been vacant for decades, through several encouraging economic cycles, dashing predictions that it would be the spark for development of an entire new extension of downtown as well as a new Boston neighborhood.
The Pritzker family, which specializes in hotels, decided to offer the land for sale to more experienced developers, and both Boston teams are involved in planning or developing other, nearby sites on the waterfront.
Karp has an option on the Anthony's Pier 4 land, next to Fan Pier, and conceivably could combine the two for a larger, coordinated development.
Drew, joining forces with Urban Retail Properties Co. of Chicago, is the designated developer of a 12-acre site owned by the Massachusetts Port Authority and located between the new Boston Convention & Exhibition Center and the World Trade Center complex. They plan a shopping center there, with a magnet anchor store like Nordstrom, as well as residential space and a supermarket.
Thomas C. Palmer Jr. can be reached at email@example.com.
© Copyright 2004 Globe Newspaper Company.
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