100 Cambridge Street/Bowdoin Place

Boston, Massachusetts

Project Type: Mixed-Use/Multi-Use

Case No: C036018

Year: 2006

SUMMARY Located on the edge of Boston’s historic Beacon Hill district, 100 Cambridge Street/Bowdoin Place is a mixed-use development composed of a new five-story retail and residential structure that wraps around a renovated 22-story government office tower (formerly known as the Leverett Saltonstall Building) constructed in 1965. Developed by quasi-public entity MassDevelopment, the project blends 34,500 square feet (3,205 square meters) of street-level shops with 56 market-rate condominiums, 19 units of affordable housing, and 580,000 square feet (53,882 square meters) of office space—floors two through 12 of the office building are dedicated to commonwealth uses and floors 13 through 22 contain Class A office space for private sector tenants. The project also comprises a 400-space underground garage that provides parking for tenants, shoppers, and workers.

FEATURES

High-Rise Building Public/Private Partnership Ground Lease Urban Regeneration Renovation Mixed Use—Three Uses or More 100 Cambridge Street/Bowdoin Place

Boston, Massachusetts

Project Type: Mixed Use/Multiuse

Volume 36 Number 18

July–September 2006

Case Number: C036018

PROJECT TYPE

Located on the edge of Boston’s historic Beacon Hill district, 100 Cambridge Street/Bowdoin Place is a mixed-use development composed of a new five-story retail and residential structure that wraps around a renovated 22-story government office tower (formerly known as the Leverett Saltonstall Building) constructed in 1965. Developed by quasi-public entity MassDevelopment, the project blends 34,500 square feet (3,205 square meters) of street-level shops with 56 market-rate condominiums, 19 units of affordable housing, and 580,000 square feet (53,882 square meters) of office space—floors two through 12 of the office building are dedicated to commonwealth uses and floors 13 through 22 contain Class A office space for private sector tenants. The project also comprises a 400-space underground garage that provides parking for tenants, shoppers, and workers.

LOCATION Central City

SITE SIZE 3 acres/1.21 hectares

LAND USES Office Building, Condominiums, Townhouses, Affordable Housing, Neighborhood Retail Center

KEYWORDS/SPECIAL FEATURES

High-Rise Building Public/Private Partnership Ground Lease Urban Regeneration Renovation Mixed Use—Three Uses or More

PROJECT WEB SITE www.bowdoinplace.com www.100cambridgestreet.com

PROJECT ADDRESS

100 Cambridge Street Boston, Massachusetts 02114

OWNER

Commonwealth of Massachusetts Department of Capital Asset Management Boston, Massachusetts 617-727-4050 www.mass.gov

DEVELOPER

MassDevelopment/Saltonstall Building Redevelopment Corp. Boston, Massachusetts 800-445-8030 www.massdevelopment.com

DEVELOPMENT MANAGER Meredith & Grew/100 Cambridge Street Development, LLC Boston, Massachusetts 617-330-8000 www.m-g.com

ARCHITECT

Elkus Manfredi Architects, Ltd. Boston, Massachusetts 617-426-1300 www.elkus-manfredi.com

PROPERTY MANAGEMENT

Steve Howard CB Richard Ellis New England Boston, Massachusetts 617-912-7000 www.cbre-ne.com GENERAL DESCRIPTION

A mixed-use development that reuses an abandoned government building and its concrete plaza, 100 Cambridge Street/Bowdoin Place blends a 580,000-square-foot (53,882-square-meter) office building constructed in 1965 with 75 townhouse-style condominium units totaling 102,000 square feet (9,475 square meters) and 34,500 square feet (3,205 square meters) of street-level retail shops. The office tower component is known as 100 Cambridge Street and the residential section is called Bowdoin Place.

Originally known as the Leverett Saltonstall Building, this 22-story government structure makes up the bulk of the property, with four to five stories of condominiums and retail shops filling in the empty Cambridge Street Plaza that used to front the Cambridge Street entrance to the building. Of the 75 condominiums, 56 were sold for market value, with 19 designated as for-sale affordable housing.

Resting squarely on the border between Boston’s Beacon Hill neighborhood and the old West End, 100 Cambridge Street/Bowdoin Place is hailed by some as one of the projects that have helped spur the revitalization of Cambridge Street. Based on full offices and positive feedback from tenants, state officials believe this type of mixed-use project can serve as a model for redevelopment of other neglected properties.

MassDevelopment, the Massachusetts Development Finance Agency, is the economic development authority for the commonwealth and the developer of 100 Cambridge Street/Bowdoin Place. A quasi-public agency, MassDevelopment was created in 1998 by the legislative merger of two independent economic development agencies—the Massachusetts Industrial Finance Agency and the Land Bank. Charged with supporting real estate development and other capital investment projects throughout the state, MassDevelopment provides development and financial services and supports projects from concept through development. For more than 20 years, the agency, along with its predecessors, has furnished more than $10 billion in financing to businesses and institutions in Massachusetts. To enter into the ground lease for 100 Cambridge, which has a term of 50 years with two optional 15-year renewal periods, MassDevelopment created the MassDevelopment/Saltonstall Building Redevelopment Corporation (M/SBRC), a wholly owned subsidiary.

Prior to the Saltonstall Building redevelopment, the commonwealth of Massachusetts had never entered into such a large joint public/private project in which so much space was occupied by the private sector. The project also marks the first time condominiums have been built on state-owned land—meaning Boston benefits from property tax income on real estate that otherwise would have been tax exempt.

THE SITE

100 Cambridge Street/Bowdoin Place is located on a quadrangle of land that is defined by Cambridge Street to the north, Bowdoin Street to the west, Somerset Street to the east, and other state-owned office buildings to the south. When it originally opened in the mid-1960s, the Leverett Saltonstall Building was one of the first new structures erected as part of the revitalization of Boston’s government district. Government agencies of one type or another have inhabited the tower for most its 40-plus years.

Because the site lies at the base of Beacon Hill, the natural topography means that the south entrance to the building is actually on the second floor and one story up from the Cambridge Street entrance. The courtyard at the building’s south entrance incorporates green space and contains the “Garden of Peace,” a tribute to Massachusetts victims of homicide, as well as a fountain in the granite wall that separates the property from the building to the south. This refurbished courtyard is known as Leverett Saltonstall Plaza, in honor of the state legislator, governor, and member of the U.S. Senate for whom the office tower was originally named.

On the other side of the plaza is the McCormack Building. Erected in 1975, this tower was also part of the state’s urban renewal efforts. Like the original Leverett Saltonstall Building, it has 22 stories and provides office space to commonwealth agencies. As of September 2006, it is under consideration by MassDevelopment for refurbishment.

A convenient walk to several Massachusetts Bay Transportation Authority subway stations, 100 Cambridge Street/Bowdoin Place is also within easy walking distance of Massachusetts General Hospital, which brings an estimated 16,000 employees into the area daily; Government Center and the State House; the financial district; Boston Common; and many other amenities.

The development is also situated very close to the city’s central artery (I-93) and lies less than four miles (6.4 kilometers) to Logan International Airport.

DEVELOPMENT PROCESS

As mentioned previously, the Leverett Saltonstall Building was completed as part of the project to revitalize the city’s governmental district, which included construction of the Government Center complex. At the time, many older bowfront structures were bulldozed to make way for the boxy Saltonstall Building, which was supposed to be a symbol of Boston’s move toward postwar modernism. The 22-story Saltonstall Building, with its expansive concrete plaza, closely resembled other government facilities nearby, but stood out jarringly against the red brick and brownstone of Boston’s posh Beacon Hill neighborhood.

In 1999, asbestos was found in the air circulation system, forcing the commonwealth to close the Saltonstall Building and move 2,000 workers to other sites. This left a large, empty, unsafe structure with no purpose. Before it could be used again, the asbestos would need to be removed—an expensive process that would involve essentially gutting the entire building. Rather than sell the site and chalk it up as a loss, the commonwealth invited the development community to rehabilitate the structure.

After receiving bids from a number of interested parties, the commonwealth awarded the project to MassDevelopment, in part because its proposal was the only one that incorporated a mixed-use plan for the site. In addition to renovating the Saltonstall Building, MassDevelopment’s proposal called for 100,000 square feet (9,290 square meters) of residential space and 34,500 square feet (3,205 square meters) of retail uses.

MassDevelopment controls the complex through a lease from the commonwealth, which retains ownership of the land. Initial expectations for return on investment from leasing out the office space were based on the private office market in Boston before September 11, 2001. Because vacancy rates for private offices in the city subsequently rose above 15 percent, those projections have not been met as of September 2006. This led to a substantial reduction in market rents; therefore, MassDevelopment’s return has been deferred until the leases roll over in order to ensure the long-term success of the building for its owner, the commonwealth of Massachusetts. Due to the active local housing market, all 75 residential units were sold by December 2005.

Although the authorizing legislation exempted the project from most of Boston’s zoning code, the Boston Redevelopment Authority’s approval was required. The developer also consulted with the Beacon Hill Civic Association, which is notoriously protective of the neighborhood, but there were no strong objections to the 100 Cambridge Street/Bowdoin Place project.

FINANCING

The MassDevelopment/Saltonstall Building Redevelopment Corporation borrowed $195.8 million in bond proceeds to finance the project. In order to obtain that funding, $20 million was provided to M/SBRC by MassDevelopment.

The $195.8 million in bond proceeds is made up of three types of bonds:

$91,660,000 in Series 2002A bonds ($28,885,000 in 5.125 percent term bonds maturing August 1, 2028, at 97.526 percent, and $62,775,000 in 5.125 percent term bonds maturing February 1, 2034, at 96.572 percent); $83,100,000 in Series 2002B bonds (federally taxable) (SAVRS®) (term bonds maturing February 1, 2026, at 100 percent); and $21,050,000 in subordinate Series 2002C bonds (federally taxable) (SAVRS®) (term bonds maturing February 1, 2034, at 100 percent).

Because it was a public project, the key financial consideration was not return on investment, but the overall benefit to the commonwealth, which—as mentioned previously—retains ownership of the land on which the project sits. The tower’s top ten floors (13 through 22) provide Class A office space for private tenants, while floors two through 12 are dedicated to commonwealth agencies. Through an agreement between the Department of Capital Asset Management (DCAM) and M/SBRC, the commonwealth holds a below-market lease on 286,000 square feet (26,569 square meters) of office space at a fixed rate for the next 28 years, with no inflation escalation of the base rent. The commonwealth’s obligation to pay base rent is also subject to annual appropriation by the state legislature.

By creating a master plan with one public component, one private commercial component, and one residential component, MassDevelopment was able to take advantage of tax-exempt bond financing for the public office space renovations while financing the private improvements through taxable bonds.

The financing does not require the commonwealth to secure the bonds and does not affect its general obligation bond cap, but provides Massachusetts with stable, low occupancy costs, ground rent, and contingent rent. MassDevelopment furnished $20 million in mezzanine financing, the return on which is subordinated to debt service, ground rent, and certain project reserves, but is ahead of the state’s contingent rent. The contingent rent can be compared to an equity return. Finally, the commonwealth gets its assets back at the end of the ground lease.

The reserve accounts are another notable feature of the financing. The project has traditional reserve accounts for debt service and replacing capital items, but it also has the following unique accounts:

Project Reserves

This account is used primarily for planned capital items and extraordinary project requirements. With certain restrictions, this account can also be used to fund debt service shortfalls, debt service reserve fund requirements, rent payments under the ground lease, costs incurred in connection with unplanned repairs and replacements, as well as planned capital expenditures. Re-leasing Reserve Fund

This reserve covers brokerage and tenant improvement expenses for re-leasing private office and retail space.

Commonwealth Tenant Improvement Reserve Fund

This reserve pays for tenant improvement expenses to renew the public office space.

DESIGN

As a generic government office building, the Saltonstall Building did not look like the rest of the neighborhood where it was located. So architect Howard Elkus of Boston-based Elkus Manfredi came up with the idea to replace the 1960s-era concrete plaza that fronted the north (Cambridge Street) entrance with the four- and five-story Bowdoin Place residential and retail space. The structure encircles the lower portion of the Saltonstall Building, echoing the red brick and brownstone of nearby Beacon Hill. To better blend in with the neighborhood, the townhouse-style condominiums are faced with either architectural concrete that looks like stone blocks or prefabricated brick reminiscent of 150-year-old bricks.

The aforementioned 34,500 square feet (3,205 square meters) of street-level retail uses at the project’s north entrance are below four stories of condominiums. And on the Bowdoin Street side of the building to the east, there are 11 three-story townhouse condos, each with two or three floors of condominiums above them.

In addition to skirting the tower with neighborhood-friendly structures, MassDevelopment sandblasted the tower clean, removing nearly 40 years’ worth of grime that had accumulated on the concrete.

In the main lobby of 100 Cambridge, visitors see one of the few publicly displayed works by renowned contemporary artist Sol LeWitt. Visible from the street, LeWitt’s “Wall Drawing #1128, 2004” is a vibrantly colored installation consisting of a number of tiles painted in different shades arranged to form a mosaic. From the Cambridge Street entrance, visitors take an escalator to the second-floor lobby of 100 Cambridge Street, which opens to Leverett Saltonstall Plaza on the building’s south side. In that portion of the building hangs a work of art by Elkus Manfredi and two paintings by Artists for Humanity—a Boston-based nonprofit group that works with inner-city children to create artwork that is displayed citywide—that were commissioned by MassDevelopment.

In addition to the Cambridge Street and Saltonstall Plaza entrances, the building is accessible through an underground parking garage, the entrance to which is located off Somerset Street. Each of the Bowdoin Place’s two-bedroom and townhouse condominiums includes a deeded parking space, but all owners have the option to purchase one of the remaining parking spaces. The remaining spaces are dedicated to tenants of the office tower and retail spaces and their customers.

CONSTRUCTION

The redevelopment of the Saltonstall Building began in February 2002. Suffolk Construction Company, Inc., based in Boston, which served as the contractor for the residential, office, and commercial spaces, signed a maximum price construction contract with M/SBRC. Meredith & Grew Inc., also locally based, handled management of the construction project, as well as leasing of the commercial space.

One of the only issues to arise during construction was related to the building’s wind load, a problem that was solved by reinforcing the Cambridge Street plaza. The formerly four-level plaza also presented a challenge when it came to constructing the retail spaces. As a result, the spaces make use of steps, ramps, and risers to offset the various levels of the former plaza below.

The developers made 100 Cambridge Street/Bowdoin Place more energy efficient by updating the HVAC system from the original steam system to a high-efficiency electric system.

Because commonwealth law requires that new state facilities contain at least 45 percent recycled materials, the development team selected carpets, corkboards, and ceiling tiles carefully.

MARKETING

The condominium component of the project was marketed by Otis & Ahearn of Boston. During construction, the company set up a sales office on site so that people could walk in off the street. When construction was far enough along, the firm finished a model unit. Otis & Ahearn also created a Web site, took out ads in the real estate sections of the local Sunday papers, and posted huge signs on the facade of the building.

As occupancy rose in the condos, the model unit had to be moved several times as buyers kept purchasing it out from under the sales team.

The office space marketing was handled by Meredith & Grew, which also made use of large signs on the facade to create buzz about the property. In addition, the agency held broker events on site, including breakfasts and parties, as well as other networking events. It also relied on its background and knowledge of the marketplace to locate businesses that may have been looking to move their offices.

Based on the Saltonstall Building’s history, marketing 100 Cambridge was a challenge. Adding to that challenge was the fact that the vacancy rate of private office space in Boston was creeping up toward 15 percent. Even though it took longer than anticipated to fill the space under these circumstances, Meredith & Grew accomplished the task.

TENANTS

Office tenants at 100 Cambridge Street range from a law firm, which occupies the top two floors, to technology companies and consulting firms. On the condominium side, there are 17 one-bedroom units, 13 two-bedroom units, ten townhouse units, and 16 units with two bedrooms and a study, all of which are being sold at market rate.

The one-bedroom condos contain between 735 and 800 square feet (68 and 74 square meters) of living space. Each of the townhouses along Bowdoin Street features two bedrooms and roughly 1,440 square feet (134 square meters) of living space. The 13 two-bedroom flats above have between 1,100 and 1,400 square feet (102 and 130 square meters) of living space. The units with two bedrooms plus studies are the largest of the living spaces, comprising between 1,129 and 1,759 square feet (105 and 163 square meters). Residents in the market-rate units include empty nesters, professionals who work in the financial district or at Massachusetts General Hospital, some retirees who winter in the south, and a few who use their units when visiting town. Sales of the 19 affordable units were handled by the Community Builders, Inc., which conducted a lottery to determine who would be able to buy them.

The Cambridge Street retail spaces are occupied by Brooks Pharmacy and Citibank. And as of September 2006, leases were being negotiated with a coffee franchise and a child care provider. Cambridge Street is becoming an increasingly attractive retail corridor, but it is not yet a shopping destination. The attraction of this area is that spaces are leasing for $20 to $50 per square foot ($215 to $537.50 per square meter), whereas over on the city’s trendy Newbury Street, leases run upward of $100 per square foot ($1,075 per square meter).

MANAGEMENT

In 2003, MassDevelopment contracted with CB Richard Ellis New England for third-party management of the office tower and retail space, as well as some oversight of the final stages of construction. Management costs are distributed according to each tenant’s lease terms. For example, the commonwealth’s expenses are treated differently than the private sector tenants’. Despite this, all services are provided equally to all tenants, whether they are a state office or a private office tenant.

The relationship between the commercial, retail, and residential components is spelled out in a master deed that covers shared common areas and shared systems. This ensures a long-term relationship among all the uses of the complex.

PERFORMANCE

The revitalized 100 Cambridge Street opened in January 2004 and, as of June 2006, the office tower was 98 percent occupied. As mentioned earlier, the 56 market-rate condominiums were all sold by December 2005.

Given the success in renovating and leasing 100 Cambridge Street/Bowdoin Place, the commonwealth of Massachusetts has been very happy with the development and, as a result, is looking at other properties that could be similarly “reborn.”

EXPERIENCE GAINED

By incorporating private sector, commercial, and residential components into the development, MassDevelopment is able to repay the money it borrowed to undertake the project at no cost to taxpayers. The creative reuse of an abandoned structure that otherwise may have been demolished or stood vacant for years, 100 Cambridge Street/Bowdoin Place proves that even the most sterile government building can be reborn with the right plan in place. Even though the commonwealth was exempt from local zoning, working closely with the Boston Redevelopment Authority and the Beacon Hill Civic Association resulted in a positive response to the project from both the city and the neighborhood. The mixed-use concept ensures sufficient income to pay off construction and development costs. Located in an area of town that is being revitalized with new construction and development drawing more business and residents to Cambridge Street, the building has both benefited from and contributed to the rebirth of the neighborhood. PROJECT DATA LAND USE INFORMATION Site area (acres/hectares): 3/1.21 Number of off-street parking spaces: 415

GROSS BUILDING AREA Use Area (Square Feet/Square Meters) Office 565,157/52,505 Retail 34,539/3,209 Residential 135,486/12,587

LAND USE PLAN Area Use (Acres/Hectares) Percentage Buildings 1.95/0.79 65 Landscaping/open 1.05/0.42 35 space

RESIDENTIAL INFORMATION Area (Square Feet/ Percentage Unit Type Number of Units Square Meters) Sold Average Sale Price Market-Rate Units One bedroom 17 709–778/65–72 100 $435,000–$575,000 Two bedroom 13 1,077–1,142/100–106 100 $657,500–$830,500 Townhouse 10 1,142–1,374/106–127 100 $801,950–$871,815 Two bedroom with 16 1,429–1,759/133–163 100 $850,000–$1,152,500 study Affordable Units One and two 19 702–1,689/62–156 100 $126,261–$239,392 bedroom, townhouse

OFFICE INFORMATION Percentage of NRA occupied: 98 Number of tenants: 9 Average tenant size (square feet/square meters): 61,436/5,708 Annual rents (per square foot/square meter): approximately $18–$35/$193.50–$376.25 Average length of lease: 5 to 50 years Typical terms of lease: commonwealth has a net lease; private tenants have leases with base stops

Office Tenant Size Number of Tenants Under 5,000 square feet (464.5 square 1 meters) Between 5,000 and 10,000 square feet (464.5 3 and 929 square meters) More than 10,000 square feet (929 square 5 meters) Total 9

RETAIL INFORMATION Tenant Number of Stores Total GLA (Square Feet/Square Meters) Classification Drugs 1 10,196/947 Financial 1 6,500/604 Total 2 16,696/1,551

DEVELOPMENT COST INFORMATION Construction cost: $145 million Soft costs: $54 million Total: $199 million

DEVELOPMENT SCHEDULE 1965 Building constructed. September 2, 1999 Section 55 of Chapter 68 of the Acts of 1999 approved.

Legislation directed any public or private entity to make a proposal for redeveloping the office building and its site, by purchase or lease. November 1999 The Executive Office for Administration and Finance and the Division of Capital Asset Management and Maintenance issue a request for expressions of interest for redeveloping the office building. Four private developers and MassDevelopment submitted responses. June 2000 Office building was closed for proposed rehabilitation and renovation. July 2000 MassDevelopment was designated the project developer. August 10, 2000 Special authorizing legislation was enacted. (The “Project Legislation” refers to sections 16 through 26, inclusive, of Chapter 237 of the Acts of 2000 of the Commonwealth.) May 1, 2002 Per project legislation, the property was leased by the commonwealth, acting through DCAM, to MassDevelopment/Saltonstall Building Redevelopment Corporation (“M/SBRC”) for 50 years, with two 15-year extensions. The extensions are automatic unless M/SBRC exercises its option not to extend the term of the ground lease. Spring 2002 New construction began. May 30, 2003 Affordable condo lottery was held. January 24, 2004 Building was opened to public sector office tenants. February 19, 2004 First market-rate condo was sold. August 1, 2004 First private sector office tenant moved in. October 2005 Lease was signed for first retail tenant.

DRIVING DIRECTIONS

From Logan International Airport: From Harborside Drive, turn left into the entry ramp to I-90 west (I-93)/Williams Tunnel and promptly merge onto I-90 west and continue for 1.7 miles (2.7 kilometers). Take exit 24-25 to South Boston (I-93) and then take the B Street ramp and bear right onto B Street. Turn left at Seaport Boulevard and continue for half a mile (0.8 kilometer). Turn right onto Atlantic Avenue, then make a left at Broad Street, and then take another left at State Street. Turn right onto Court Street and then immediately make another right at Cambridge Street/City Hall Plaza.

Driving time: 15 minutes in nonpeak traffic.

Derek Rice, report author Jason Scully, editor, Development Case Studies David James Rose, copy editor Joanne Nanez, online production manager

This Development Case Study is intended as a resource for subscribers in improving the quality of future projects. Data contained herein were made available by the project's development team and constitute a report on, not an endorsement of, the project by ULI–the Urban Land Institute.

Copyright © 2006 by ULI–the Urban Land Institute 1025 Thomas Jefferson Street, N.W., Suite 500 West, Washington D.C. 20007-5201 A residential mixed-use building wrapped around a 22-story rehabilitated government office tower, the 100 Cambridge Street/Bowdoin place project was developed by MassDevelopment, a quasi-public entity, to help revitalize the Cambridge Street retail corridor in Boston, Massachusetts. Originally a state government office tower constructed in 1965, the Leverett Saltonstall Building stood out against the red brick and brownstone structures in the area. The addition of condominiums and retail space is intended to bring a sense of scale and pedestrian-friendliness to the site. The Leverett Saltonstall Building?renamed 100 Cambridge Street?now provides office space not only to government agencies, but also to private businesses. The main entrance and lobby for 100 Cambridge occupies the site that used to belong to the building?s plaza?an underused space characterized by the predominant gray of the concrete used to construct it. Occupying the old plaza and the landscaping that used to surround the office tower, Bowdoin place is home to two retailers and 75 condominiums, 19 of which have been designated as affordable housing. 100 Cambridge Street/Bowdoin place site plan.