After years of keeping the project on the shelf due to nearly non-existent credit markets, Simpson Housing has finally begun preliminary earth work at the site of The Victor – its mixed-use project in Bulfinch Triangle.

The project, first proposed in 2005, has weathered years of inactivity as newly created Rose Kennedy Greenway parcels that resulted from burying the Central Artery sat unused, buffeted by the winds from the Charles River that blow through the Zakim Bridge.

Now, backhoes are clearing the way so Suffolk Construction, the project’s general contractor, can move underground utility lines to make way for the excavation and construction slated to begin in October.

But just three years ago, as the nation’s economy began to spin out of control, the project was put on hold indefinitely.

The Greenway parcels were designated for development through a years-long planning process that spawned the parameters required of all projects along the corridor.

The Massachusetts Transit Authority, now rolled into the mega-agency Department of Transportation (MassDOT), sent out requests for proposals to developers for the land it owns, and eventually designated Simpson for Greenway Parcel 1 – just across Causeway Street from the TD Banknorth Garden. The company will construct a 365,000-square-foot residential project of 286 rental residences, plus 17,000 square feet of retail space on the site, which is just over an acre.

After Simpson was designated, the firm signed a development agreement with MassDOT in 2007, and went ahead with renderings and construction documents. The plans were finished just four days after Lehman Brothers collapsed, dragging the credit markets with them.

‘On Hold Indefinitely’

So, with no possibility of making the financials work, the company refocused on the 20,000 other residential units it owns across the country, including the existing residential complex Highland at Dearborn in Peabody. The company also stayed on top of its approvals and permits for The Victor so they would be up to speed when the credit markets returned.

Then, early last year, things started to brighten up.

“In particular, our neighbor [on the Greenway], Archstone, delivered their rental project, the Avenir, in mid-2009, and by May of 2010, they were stabilized,” said Patrick McMahon, vice president of development for Simpson. “By July of 2010, I think they were nearing 95 percent occupancy. A 12-month lease-up of an approximately 240-unit project is extremely quick, especially in a struggling economy.”

In addition, he said, with the exception of one project – Boston Properties’ 86-unit, Atlantic Wharf, which opened July 1 — there have been no new deliveries of large-scale, higher-end, luxury rental products in the downtown rental market since the Avenir.

Those indications of pent-up demand, he said, “showed us that it could be time to restart things.”

The firm was also encouraged by the overall returning strength in the fundamentals of the apartment market. Vacancies were going down, rents were ticking up, and concessions for things like free rent were burning off.

“By mid- to late-2010, and certainly now, that thrust in the marketplace for rentals has reached almost a fever pitch, and we wanted to be the first project out of the ground,” McMahon mused.

‘Ongoing Income Stream’

That was music to the ears of MassDOT officials. 

The agency had been sympathetic to Simpson’s financial situation, pretty much the same for developers across the board through the recession, and granted the company a year’s hold on the project. As long as company representatives could demonstrate that conditions in the debt markets were such that large-scale construction was still not economically feasible, then they would get an extension, which they did.

Simpson has a 99-year ground lease with MassDOT. For that, they have already paid about $1.5 million. The firm will give the state another $10 million around July 2013, or 24 months after construction has begun.

The project is also creating a continuous revenue stream for the cash-strapped state agency. The state will pocket 15 percent of all sales or refinancings after Simpson repays the debt and outstanding equity and the return on equity.

“We knew we were not going to find a better developer,” said William Tuttle, deputy director for real estate and asset development for MassDOT.

“They paid a holding rent along the way, and then did the honorable thing and hung in there. There’s an ongoing income stream here. Someone sitting in my chair in 30 years is going to be excited to see these checks still coming in unexpectedly,” he commented. “We’re getting non-tax revenue flowing into our agency, which needs the money. At the same time, we’re getting [a product that was] always planned for this parcel. This is bringing a second major residential use to this area, which is already becoming a much more vibrant district.”

On top of that, the project will create 400 construction jobs, something else the agency was looking for.

“We look at these projects very much nowadays not just for the financial return on the assets … but also as opportunities for economic development,” Tuttle continued. “It’s not just about the money – well, it is about the money, but it’s also about those social policy objectives that we’re trying to accomplish in the state.”