A key city board on Thursday approved changes to the Winthrop Center project that its developers hope will help jump-start construction on the stalled tower. But those changes could cost the city $26 million in affordable-housing funds.
The Boston Planning & Development Agency board blessed Millennium Partners’ plan to parethe partly built tower by about 100,000 square feet and allow rentals instead of for-sale condos on its upper floors. The height will remain at 691 feet, making it the Financial District’s tallest building. The veteran downtown developer said it needs the changes to salvage the $1.3 billion project after $800 million in loans fell through at the start of the coronavirus pandemic. While work began in late 2018, construction has been stopped for several months while Millennium seeks additional financing
“This effort is all about getting back on track,” said Joe Larkin, who is leading the project for Millennium. “We’re trying to get back into construction here, and it requires to us to put together a capital structure and program that’s more reflective of what [investors] would want.”
The BPDA hired the accounting firm Ernst & Young to evaluate Millennium’s new plan. Its report, finalized just hours before Thursday’s meeting, largely backed up the developer’s claims, finding that financing has dried up for luxury condo towers since the pandemic began but is still available for rental units.
“There are not, from Ernst & Young’s perspective, lenders who are currently making loans on high-end luxury condos,” said Devin Quirk, the BPDA’s director of real estate. “That is not a financing course that is readily available.”
But the switch will come at a cost. When it offered $151 million to buy the city-owned site four years ago, Millennium agreed to pay $101 million upfront — which it did in 2018 — and the remaining amount incrementally as it closed sales of condos when the building opened. Now those payments will be spread over 10 years.
The flip to rental units also will lower the firm’s required payments into the city’s affordable-housing fund, from $48 million under the original plan to $22 million. That, in turn, imperils an affordable high-rise building Millennium is planning to help build in Chinatown, though Larkin said his firm remains committed to the project.
The changes, particularly the diminished housing funding, prompted concerns from board members, who asked several sharp questions of Larkin. But ultimately, they voted unanimously to approve the plan.
Beforehand, the move drew fire from City Council member Michelle Wu, who posted on Twitter that the city shouldn’t have allowed Millennium to launch construction on the city-owned site without the financing locked down and that the vote should be delayed to provide more time to study Millennium’s plan.
“This is another fire drill of the Administration’s own doing to make excuses for a bad deal & absence of transparency,” she wrote. “Needless to say, a vote to approve this major, major project — renegotiated behind closed doors — should not take place today.”
But Councilor Ed Flynn, whose district includes both Winthrop Center and the site of the affordable-housing high-rise in Chinatown the tower would help fund, said he supported the changes if they mean the project moves forward.
“If the project cannot make the changes to secure the financing to restart construction, the project may be in jeopardy and leaving a vacant site at the center of Downtown,” Flynn wrote in a letter to the BPDA Thursday.
That argument prevailed, with BPDA staff this week saying it did not want to leave a “hole in the ground” in the heart of downtown Boston. Larkin said he has had detailed talks with potential investors and aims to close on new financing this summer, with work restarting in September. But, he acknowledged, there are no guarantees.
“We’re having some very substantive conversations,” he said. “We’re cautiously optimistic that we’re going to be successful here.”