Could Boston have gotten a higher price for one of the hottest sites in town?
Could Boston development officials have gotten a higher price — and more money for taxpayers — for one of the hottest development sites in Boston?
That’s what city budget watchdogs and some real estate experts are wondering about the sale of the shuttered Winthrop Square Garage, which the Boston Redevelopment Authority is negotiating to sell to Millennium Partners, which has proposed building one of Boston’s tallest towers there.
While Millennium’s offer of $151 million was by far the largest among those from six developers who bid on the site, there are growing questions about what was billed as a wide-open public process — and whether the BRA could have driven the bidding even higher.
BRA officials say the sale process was run fairly and that Millennium’s winning bid was well beyond what they expected to receive.
Months before proposals were due in April, the BRA had appraisals in hand that valued the site as high as $148 million, twice what the other bidders except Millennium offered to pay. Officials declined to release those appraisals publicly, and in their public comments valued the site at far less than the appraisals did.
Moreover, several losing developers said the BRA made changes midway through the process that discounted other benefits of their proposed projects.
“This was completely opaque,” said George McCarthy, president of the Lincoln Institute of Land Policy, a real estate think tank in Cambridge. “The way this was done opens it up to all sorts of criticism. An organization like the BRA should know better.”
City Council president Michelle Wu, who had prodded the BRA on the sale process, said the episode reflects longstanding concerns about the way it conducts business. She said it is hard to know if the powerful development authority is striking the best deal for taxpayers when it plays its cards so close to the vest.
“We could always use more transparency from the BRA,” Wu said. “It’s a constant effort.”
And in this case, there’s a lot of money at stake. The one-acre site of the condemned garage on Federal Street is likely to fetch one of the highest prices for city-owned property in decades and trigger redevelopment worth $1 billion.
Why the criticism then when the highest offer, from Millennium Partners, topped the appraisals the city had received over the years?
It boils down to this question: If the bidders had seen the valuations commissioned by the city, would they have gone even higher?
In the months before the BRA put the Winthrop Square site up for sale, BRA officials used much lower figures to value the property. At a City Council hearing in June 2015, BRA director Brian Golden called an estimate of $100 million “very much on the high side.”
“Realistically,” he said, “probably more in the $40 million range.”
Yet as early as 2013, the BRA had commissioned an appraisal that valued the one-acre site — if zoned for a tall tower and with an anchor tenant signed on — at $91.5 million. Golden said the BRA staff considered that figure “outlandishly high.”
And when developers filed preliminary proposals in 2015, two included financial plans offering to pay $92.5 million and $100 million. Golden said the BRA did not even open those proposals at the time.
Later in 2015, the BRA commissioned two more appraisals. One, from the real estate firm Cushman & Wakefield, valued the site at $100.2 million, with zoning for a 1.3 million-square-foot tower, while a second, from Integra Realty Resources, estimated the value at $148 million.
Several months later, as the BRA was preparing to receive final bids, Cushman and Integra provided updated values, with Cushman raising its estimate slightly, and Integra holding at $148 million.
But when bids were filed in April, most came in far lower — bunched between $50 million and $75 million — leaving some City Hall budget hawks to question why the BRA didn’t use its appraisals to engineer a bidding war — setting the figures as a starting point for the bidding, not a cap.
“The whole thing just doesn’t make any sense,” said Matt Cahill, executive director of the Boston Finance Commission, a city watchdog agency.
Yet the BRA had its reasons for not going public with the appraisals. Those figures, Golden said, could have capped the price. If a city appraisal valued the site at, say, $70 million, who would have paid more?
“We didn’t want to undermine our ability to secure a higher price,” Golden said.
But with the appraisals pointing higher, not lower, than the numbers that had been discussed publicly, that argument makes little sense, Cahill said. The BRA’s job, he said, was to get the best return for the city on an unusually hot property.
“You’re not negotiating down — the appraisal is the bottom price,” Cahill said. “In my opinion, if they’re agents for the city, they’ve breached their fiduciary responsibility by not sharing those appraisals.”
Still, it’s not clear how much the appraisals would have influenced the bidding.
Joe Larkin, who’s spearheading the project for Millennium, said the company bid so high because it badly wanted the property and didn’t want to get outspent for it. He said he didn’t know the appraisals — made public in July by order of the Massachusetts supervisor of records — existed until he was informed of them by the Globe.
Several developers said they might have bid differently had they known of the city valuations, but declined to comment publicly.
Others said it wouldn’t have changed much; they bid what they thought their project could bear, and in some cases offered less cash, but more in the way of ancillary benefits, such as affordable housing.
Price was not a top priority listed by the BRA when it issued a request for proposals in March. Rather, it emphasized economic development, an enhanced downtown, and environmentally friendly building.
Trinity Financial took that guidance to heart. In a preliminary offer in 2015, Trinity bid $92.5 million, but its more recent proposal was for $60.5 million, with 40 percent of the proposed units reserved for affordable housing — an appeal to a key priority of the administration of Mayor Martin J. Walsh.
Trinity’s managing director, Kenan Bigby, said the company would not have significantly increased its bid if it knew the BRA thought the site was worth far more.
“We trust how we value land and development,” Bigby said. “You can put up a big offer, but then if you win, you still have to make it work.”
Another developer, Tom O’Brien, head of the BRA under former mayor Thomas M. Menino, said the authority did not seem to put a value on the noncash aspects of the bids. His company, HYM Investment Group, proposed a new church for the nearby St. Anthony’s Shrine and a new school.
HYM offered $68.25 million in cash for the property and valued the church and school at $94 million in public benefits, O’Brien said, which made his company’s proposal higher than Millennium’s.
“There were a number of goals the city laid out, around job creation, civic improvements,” O’Brien said. “It seems like their final decision was based mainly on price.”
Golden said the BRA conducted a financial analysis of the bids but would not provide it, citing ongoing negotiations with Millennium. He said the BRA liked not only the size of the Millennium bid but also the company’s strong track record of building complex projects. The company just opened the $700 million Millennium Tower in Downtown Crossing and has built two other luxury condo projects nearby.
“That’s all good,” Golden said. “We feel right now we’ve got a fundamentally solid product here.”