Boston Mayor Tom Menino made headlines last week when he went before the Greater Boston Chamber of Commerce and offered up $40 million in gap financing. A new lending program, Boston Invests, would distribute HUD funds to development projects that had been permitted but had stalled because of tight credit markets.
But while the mayor’s speechwriters were crafting his Chamber speech, Menino was quietly huddled in the city-owned Parkman House, chasing a much bigger pot of money.
Joining Menino were his top political aide, Michael Kineavy, Boston Redevelopment Authority Director of Economic Development Brenda McKenzie and representatives from local trade unions including the New England Regional Council of Carpenters and IBEW Local 103. Together, they pressed officials from banks and funds flush with union pension money – including NEBF, ASB Capital and First Trade Union Bank – to contribute funds to stalled Boston developments.
A source close to union leaders said Menino, aware of the finite impact the $40 million in HUD funds will have, was pressing to secure financing commitments from the pension managers ahead of the Chamber speech.
That didn’t happen, however.
"There were no firm commitments," said Tom Flynn, the carpenters’ executive director. Still, Flynn said, "I applaud the mayor for putting people in the room, getting a few heads together."
Mike Monahan business manager for IBEW Local 103, described the meeting as an outgrowth of labor’s relationship with Menino, saying, "We’re here to help. There are pools of pension fund money available to help jumpstart these projects. Everybody in that room was more than willing to help."
Still, the source close to union leadership (who didn’t want to be named out of fear of angering Menino) said because City Hall will be brokering financing deals, City Hall politics – personal relationships, political fundraising and the like – may soon come into play. "Unless you’re one of the mayor’s chosen developers or you pay to play, you won’t be considered," the source said.
"We’re still having discussions with the unions," Menino said Wednesday after a topping-off ceremony at Fan Pier. "No doors have closed. There are still opportunities. We’ll continue to talk to them about getting additional revenues. That was just the first meeting."
Asked how large a contribution he’d like to see the labor funds make, the mayor replied, "Now, if we could get $40 [million] or $50 million, that would be great. Any commitment is a good commitment. We’re looking for people to step to the plate, get shovels in the ground and put people to work."
Mayoral Money
"Some projects are stuck in neutral," Menino said at his Chamber speech. "We’re going to put people to work, move projects forward and generate a return on our investment." He singled out One Franklin, Fan Pier and Kensington Place as being the type of projects that could use an injection of capital.
In the press scrum afterward, Menino painted the bridge funds as "leverage" that developers could use to exert larger commitments from reluctant lenders. A mayoral spokeswoman characterized the gap financing program as being aimed at reopening the credit markets. She said the fund allocation would depend on the number of applicants.
It’s unclear, however, how helpful a cut of $40 million would be in leveraging hundreds of millions in new borrowing from battered, wary lenders. Asked whether the $40 million would be enough to resuscitate the city’s stalled developments, Menino replied, "Not all of them – just a couple."
The second building in the Fallon Co.’s Fan Pier development, which Menino officials had hoped would house Cambridge pharmaceutical firm Vertex, is on hold until next year, Joe Fallon said last week. Fallon blamed deadlocked credit markets for the delay, saying banks are largely sitting on the sidelines until next year. In 2002, Fallon used $15 million in city-administered loans to push his waterfront Westin Hotel project forward.
"I experienced the benefit of those HUD funds," he said. "There’s no question that they’ll help fill the equity and funding needs." Fallon is optimistic that credit markets will loosen by the second quarter next year – around the time city officials said they’ll begin distributing the current batch of HUD loans.
Work on One Franklin, a 1.2 million square-foot office, hotel and residential complex atop the former Filene’s, stalled months ago when Vornado Realty Trust and Gale International disclosed they were unable to plug a $50 million hole in their financing. Now, Gale’s John Hynes said, the joint venture has had to redesign the project, entirely deleting the residential component. The delay softened committed financing to the point where, when design work is finished this week, Gale and Vornado will have to go back out and reassemble $300 million in financing for the new $525 million design.
"We’re a $500 million-plus project," Hynes said. "Who knows how that’ll leverage." He added, "Almost as important as the monetary amount is the public commitment, that the mayor is moving to do whatever he can to get these projects moving."
