Deferred Gratification

A minority-owned developer, undaunted by setbacks, fulfills its goal of completing a record-setting speculative office tower in the heart of Boston's business district.
August 11, 2010

The path to success took 16 years to complete. But Columbia Plaza Associates, a minority-owned development firm in Boston, overcame a depressed office market and two unsuccessful joint ventures to arrive at the sale of the million-square-foot State Street Financial Center, for which it was a co-developer, at a record price for the Boston high-rise market.

The project plan that resulted in downtown Boston's first speculative office building since the late 1980s traces back to 1987, when the Boston Redevelopment Authority named CPA, a group of local Asian-American, African-American, and Hispanic individual and organizational investors, as minority-owned developer for a downtown site.

Under the BRA plan, CPA was obligated to develop a site in Boston's economically depressed Roxbury neighborhood in return for the downtown job. Lacking the financial resources to undertake two projects with a combined value of more than half a billion dollars, CPA raised enough money from development partners to take the planned downtown office building through its permitting and design phases.

CPA teamed with Metropolitan Structures, the real estate development arm of Metropolitan Life Insurance Co., in 1988, shortly before the Boston office market started to fall apart. By 1992, the Hub's office vacancy rate had risen to 20%, and the project, with its design 60% completed, was put on hold. Five years later, Metropolitan Structures decided to pull out.

By the end of the 1990s, fueled by low interest rates and the dot-com explosion, Boston's office vacancy rate had fallen to 3%. CPA sought a new development partner in Boston-based Chiofaro Company, but negotiations fell through when a deadline for purchasing the downtown site was missed. The deal looked dead.

 
State Street Financial Center’s low-rise element faces the historic Market District, while its 36-story tower is compatible with high-rise towers in the adjacent Financial District.


New partner to the rescue

In 1999, John Hynes III, a principal with Boston-based Lincoln Property Co., left that company and opened a Boston office of The Gale Co. (formerly Gale & Wentworth), a real estate services firm based in Florham Park, N.J. Gale signed on as co-developer, resuscitating the project and resulting in the formation of an entity called Kingston Bedford Joint Venture.

"We had the plans rolled up and our fingers crossed," says Duncan Pendlebury, project principal with Jung/Brannen Associates, the building's Boston-based architect. "The project finally started to come back to life."

The original marketing plan to seek multiple tenants was gladly abandoned in 2001 when State Street Corp., with $1.4 trillion of assets under management, signed a lease for the entire one million square feet of space — the largest single office lease transaction in Boston history.

State Street, a manager of U.S. mutual funds and pension plans, began moving staff into the building last July. It intends to occupy 60% of State Street Financial Center by July and will move other employees into the building as operations require and leases expire. State Street's operations are also housed in two other downtown office buildings, as well as offices in Quincy, Mass.

Last February 1, an hour before the kickoff at Super Bowl XXXVIII in Houston, American Financial Realty Trust, a real estate investment trust based in Jenkintown, Pa., purchased the building for $705 million — double the building's $350 million development cost. (The core and shell construction, including modifications required by State Street Corp., ran $195/sf.) Perhaps that news inspired the New England Patriots to go on to win the game, 32-29, on a late field goal.

Market recognition

"The asset is superlative," says Maryann Gilligan Suydam, who heads the Boston office of Equity Office Property Trust, the city's largest office-property owner. "It's unlikely you'll see a tower of this caliber built downtown again. The price reflects that inherent aspect, not to mention the long-term quality of the tenant."

Initially known as One Lincoln, the building consists of a 36-story tower and a six-story, brick-clad section. The low-rise portion is scaled for compatibility with historic Mercantile District buildings, while the tower relates to the nearby Financial District's high-rise buildings.

The larger floor areas at the base enable the building to provide floor plates ranging from 50,000 sf on lower floors to 18,000 sf in the tower. The tower's crenellated setbacks provide additional corner offices and allow the building to remain within its allocated floor area ratio of 14.

Jung/Brannen's Pendlebury believes the soundness of the original design concept, developed in the late '80s and early '90s, was validated by the city's approval, almost a decade later, of a virtually unchanged plan. For the building's second iteration, one floor was deleted from the tower plan in order to provide greater ceiling heights. This allowed the size of windows to be enlarged by 25%. A revised environmental impact statement was required because of an increase in the number of parking spaces and changes in regulations.

Rigorous review

The building was one of the first projects subject to Boston's design review process, under new zoning regulations applying to buildings larger than 500,000 sf. "This was not an easy ride," Pendlebury says. The building's environmental impact, shadow imprint, and effect on views from neighboring structures all had to be documented.

"For all the complications involved with a building of this size, including a challenging site and a rigorous approvals process, the project moved quickly," Pendlebury says. "The building was fully leased before construction was completed. It is a great success story."

Exterior highlights of State Street Financial Center include 28-foot-long custom light fixtures attached vertically at four upper levels of the tower. Neon tubes within these stainless steel units provide accent lighting at night. At the top of the building, eight 28-foot-long stainless steel spires give the building round-the-clock identity. At night the top of the spires is lighted using a fiber optic system that places lighting elements at rooftop level for easy maintenance, according to Jung/Brannen project manager Norman Adams.

State Street Financial Center is at the southern edge of the Financial District, on the border with Chinatown and a block from South Station, a major commuter rail terminal. Boston's new "Big Dig" underground traffic artery also provides good access for vehicular traffic — a pleasant surprise, says Pendlebury, since the Big Dig's exact route had not been mapped at the time the building's plans were being finalized.

Construction manager Skanska USA Building Inc., employed an "up/up" scheduling sequence that reduced construction time by allowing simultaneous construction of the below-grade parking garage and erection of the tower's steel frame (see BD&C, September 2001). Once the excavation and foundation were completed, erection of the building structure began at the bottom of the garage, as well as on the ground floor.

 
Three types of marble were used to cover the lobby’s floor and walls. The lobby
connects to a retail “street” that extends to an entrance on the opposite side of the building.


Skanska was required to integrate schedule modifications into the project that were requested by State Street Corporation, including removal of a planned atrium and creation of two-story spaces in the low-rise portion of the building for trading rooms. Garage work was accelerated in order to complete the installation of electrical gear that was needed to make computer systems operational several months in advance of State Street's occupancy, says Skanska's Kerin Evin.

Reflecting on the project's many twists and turns, CPA managing director Paul Chen says there were times he thought the project would never get built. But he and his colleagues pushed on. Says CPA co-manager Kenneth Guscott: "We have demonstrated that minorities have the ability to develop a major office building in Boston's central business district. This was the largest partnership of its kind in America, built on spec with participation by a minority business group."