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Mayor Walsh calls for Fenway Center tax break

$4.6 million deal could spur a start to 5 buildings over Pike

The tax deal is designed to jump-start the development of Fenway Center, enabling construction to start early next year on new retail spaces, hundreds of apartments and a parking garage on property that straddles the Massachusetts Turnpike.

The Architectural Team

The tax deal is designed to jump-start the development of Fenway Center, enabling construction to start early next year on new retail spaces, hundreds of apartments and a parking garage on property that straddles the Massachusetts Turnpike.

Mayor Martin J. Walsh is proposing to give a $4.6 million tax break to one of Boston’s most ambitious developments, a $550 million project near Fenway Park that could allow him to make his first major imprint on the city’s skyline.

The tax deal is designed to jump-start the development of Fenway Center, enabling construction to start early next year on retail spaces, hundreds of apartments, and a parking garage on property that straddles the Massachusetts Turnpike.

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A vote on the financing is scheduled for Thursday at a Boston Redevelopment Authority board meeting.

Fenway Center has languished for several years due to legal and permitting challenges, and its developer, John Rosenthal, has struggled to generate enough funding to move forward with the project.

But Walsh has expressed a willingness to help since his first days in office, saying the construction would generate jobs and continue a building boom that is transforming vast swaths of the city.

“This is a positive partnership that’s going to help to spur growth,” Walsh said in an interview Sunday. “The city is open for business, and we’re going to work with developers on good solid projects that can be supported by the community.”

Fenway Center would result in construction of a total of 1.3 million square feet of residential and commercial space in five buildings between Brookline Avenue and Beacon Street. It would include 420 apartments, space for stores, restaurants and offices, and nearly 1,000 parking spaces.

Plans also call for a farmers market, a bike-sharing station, multiple restaurants, and other amenities.

“We are going to cover up the highway and build a new neighborhood out of thin air,” said Rosenthal, president of Meredith Management Corp. “This is going to be where the pebble drops in terms of smart, transit-oriented, and sustainable development.”

The project is particularly costly and complex because it requires construction of a $35 million deck over the Mass. Pike to support its main parking garage as well as a 27-story tower with offices, apartments, and stores.

Rosenthal and city officials said the tax relief is structured to help fund construction of the project’s retail spaces, not its luxury apartments. The deal would reduce the project’s taxes over a six-year period during its construction and early years of operation. After its completion, Fenway Center is expected to generate about $5 million a year in taxes, and the developer would pay the state $226 million to lease the 4.5-acre development site over 99 years.

Currently, the property generates about $152,000 a year for city coffers.

The tax deal needs approval from the City Council and state economic officials, in addition to the BRA’s board.

The arrangement holds some political risk for Walsh. There is no guarantee the costly and technically complex Fenway Center will be built — even with the city’s help. The project would be the first successful development to be constructed on so-called air rights over the turnpike since Copley Place was built in the 1980s.

Such developments must be carried out while preserving access to eight lanes of highway and multiple rail lines.

The last attempt to build an air-rights project over the turnpike — a towering condominium, hotel, and retail complex known as Columbus Center — resulted in a spectacular failure; lenders pulled out financing as the economy tanked in 2007 and 2008.

Rosenthal has been working on his project since 2007. It has been delayed repeatedly, first by a long city permitting process, then by prolonged lease negotiations with the state.

After it won BRA approval in 2009, the project drew a lawsuit that tied it up for another three years, and Rosenthal has since struggled to lock down final permits and financing.

He had initially requested a $7.8 million tax break from the administration of then-mayor Thomas M. Menino, but Menino did not take action on the matter before leaving office earlier this year.

Walsh took up the matter after he arrived at City Hall, repeatedly citing Fenway Center as an example of the kind of development his administration wants to support. The two sides ironed out the tax deal during months of negotiations.

“The $7.8 million request was a little steep, but we were able to work with John to come up with a good compromise,” Walsh said.

Though the mayor’s offer is less than requested, Rosenthal said, the deal has been accepted by his primary financial backer, the international pension fund investor Bentall Kennedy, and will allow construction to proceed.

But the battle to start construction is not over. Rosenthal said it will take at least a year to finalize construction drawings, get a building permit, and complete financing arrangements with Bentall Kennedy.

That leaves the project vulnerable to changes in the economy or local real estate market that could undermine its feasibility. For example, about 8,000 apartments are expected to be completed in Boston during the next few years, an unprecedented influx of supply that has caused some to question whether development of additional units will pay off.

The tax break is tied to the onset of construction and would not be provided unless the work proceeds.

Rosenthal said he is more confident about Fenway Center’s prospects than ever. Earlier this year, a new Yawkey Commuter Rail Station was completed at the edge of the property, and the neighborhood around it has continued to attract new residents, restaurants, and stores.

“I think we’re going to be hitting the market at the right time,” Rosenthal said.

Casey Ross can be reached at cross@globe.com.
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