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BRA agrees to give up $3.5 million it's owed to help financially troubled hotel stay open
By adamg on Fri, 09/18/2015 - 8:33am
The BRA board last night approved a refinancing plan for the Crosstown Center Hampton Inn on Mass. Ave. in which holders of the project's debt will simply write off a good chunk of the money it owes them.
The hotel's holding company - backed by local real-estate company Corcoran Jennison and developer Kirk Sykes - is seeking to refinance bonds issued in 2002 that carry an interest rate of about 6.5%. The 175-room hotel's holding company has never made any payments on the roughly $43 million worth of bonds, in fact, it defaulted on them in 2009. Under a "forbearance" agreement reached after the default, it is supposed to pay the interest on the bonds.
To help persuade a lender to issue a mortgage at today's lower rates, the BRA and other lenders have agreed to forgive part of what has become roughly $63 million of debt. In the BRA's case, that will mean erasing $500,000 of the $7 million the authority originally sank into the project - and all of the $3 million in accrued interest on that investment.
BRA staffers estimate that with a new, cheaper mortgage, the hotel could finally become profitable starting sometime next summer or fall. Without the refinancing plan, BRA officials warned, the project could simply go under - meaning unemployment for the 50 people who now work there.
Although the BRA has never seen any of its investment paid back, it does receive roughly $300,000 a year in rent payments from the hotel. When the hotel does get into the black, some 40% of the profits would go to repay the BRA.
Last year, Moody's said the hotel's financial outlook remained somewhat shaky.
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Comments
Math
OK, so from the summery it seems the state (us) are out 3.5 million to date. They say that's OK as it's keeping 50 people employed. So that's $70k/person -- a reasonable yearly wage for someone in Boston. Or that's about three years at UMass.
The government should invest in things which help everyone: Roads, schools, etc. If the private market won't give someone a loan it's because they suspect the recipient will default. The state should assume the same.
B-but where's our opportunity
B-but where's our opportunity for personal power, graft and cronyism with other peoples' money?!
Poor tourists who book this hotel online
I've seen more than a few tourists bewildered when they realize the hotel they have booked on the Internet is across from the entrance to Rt 93, Boston Medical Center and the homeless shelter.
There doesn't seem to be much of a viable business proven here. Might have been different if the Olympics, well....
The BRA staff are nice people, but their numbers don't always align with the banks and real estate developers, except in hand-outs.
Hotel next to hospital can make sense
as there are several near MGH, Tufts Medical Center, and Longwood Medical Area.
Yes, but,
If you look at the Moody's report it looks like their occupancy rate is about 83%, which I think is a good number, although I'm not in the hotel business. So, it seems lack of guests is not the problem -- expenses too high? rates too low? I don't know. Maybe they have to charge really low rates to get people to stay in that location.
What was the intent?
This isn't the first time this hotel has been in the news... http://www.bizjournals.com/boston/blog/mass_roundup/2014/09/the-lesson-o...
What was the intent of publicly financing a hotel? Were people thinking tourist dollars? I think I'm missing the point of this project. Am I missing something?
BRA
The BRA has to "do deals" to exist. They get no public financing. They self-fund by making deals like this - taking land by eminent domain and leasing it out, development fees, interest on money designated for affordable housing (which often doesn't get built), and apparently financing construction. One of the problems with the BRA is that they have a direct conflict of interest - they get paid to approve deals. They have no incentive to limit or nix projects because that is how their salaries get paid. This is one reason why so many advocates want to roll the BRA into city government which would/should make them more accountable and align their interest more with the voters and residents of the city.
The fundamental problem with
The fundamental problem with that is if every land deal has to come through the City Council, which would be the direct result of this, development would slow to a trickle. The money grubbers on the council will want this and that and the other to OK any transferral of land. The BRA is able to skirt that process. That is literally the only way development happens in the City. If we had an effective Council, then it would be ok.
There is a good and a bad to it. The good is that all the shady shit that we think the BRA is up to would happen in a public forum. The bad is that the result of the public forum would be no development. None.
Edit: After reading replies to this below I realize now that I was unclear. Please allow me to elaborate. The BRA does two things that encompass the bulk of their work for/with the City.
1. They promote developments by facilitating tax "incentives" or public financing, or a bunch of other shit that I'm against in a general sense, but by which they have driven a generation's worth of development.
2. They facilitate the transfer of land into and out of the City in a strict "owned by the City of Boston" sense, like a school, or a public way, or a plot of land claimed by forfeiture or eminent domain.
It is #2 that would slow to a crawl, if not halt outright, if each developer had to come before the City Council, bow and scrape, and make their case for why this transfer (at market rate, or whatever) should be allowed. The BRA is able to circumvent this by buying the land at nominal-only pricing ($1 or whatever) and selling it in a semi-private transaction to the developer. The politics inherent in the system described by the dissolution of the BRA are not modern, or useful. Fix those, and the BRA can be folded into City Govt without failing development.
City Council?
Why would they be involved? Seems like there should be a well financed zoning variance government entity within the City that reviews large scale deals to make sure they work for the city, stakeholders and tax payers. So Don Chiafro wants to build something higher than zoning allows, there's a hearing in front of that board.
Why wouldn't that be the right plan?
if every land deal has to come through the City Council???
No. it wouldn't. It would be the Zoning Board of Appeal
http://www.cityofboston.gov/isd/building/appeal.asp
Read what i said
BRA handles transfers of land in many of these developments. If the BRA didn't do it with a $1 purchase from the City, it would be up for vote in front of the Council. I'm not talking about statutory approval.
Why is that needed though?
Why not just go free market and sell land for its value, as determined by what someone will pay? In the case of a city owned land, then yes there needs to be accountability but under the umbrella of city government makes more sense than the BRA. In case of say, Widdett, where developers and politicians (and construction unions) want to kick off a huge development, step # 1 should simply be to buy the land from the food vendor coop. It doesn't need to involve the government unless someone is looking to strong arm someone else.
Again, I'm only speaking
Again, I'm only speaking directly about transfers of land into and out of City ownership. Unfortunately, with many developments there happens to be this little corner over here, or that tiny lot over there that can make or break the feasibility of the project, and over which the City Council would have to hold a hearing to transfer ownership. The BRA simplifies this through by buying the land from the city without a hearing (the only entity other than the federal govt allowed to do so, I believe) and make a deal for the land with the developer. When you're talking about moving a road, for example, which is happening consistently in the Seaport, by a little amount, you get into this process. The BRA doesn't have much to do with private development that doesn't require prodding from the City to get done, or impact the City's footprint. Strictly private development is mostly strictly private, it's just rare.
Other Cities Manage
As others have pointed out - if you do this according to zoning - the BRA typically doesn't need to get involved. The core problem is our zoning is horribly out of date (and that's not an accident). The BRA likes all these little one-offs (like road transfers and cornice overhang fees) because that's how they extort developers to self -fund themselves.
Seaport may be an exception - at least for now - but most of the downtown projects I'm familiar with don't involve public transfers - the problem is usually just a negotiation over the height/density and details like parking of the project. In cases like Winthrop Square garage and perhaps eventually Widett - probably makes sense to have a public process through the council.
Most of the rest of the world manages development better and perhaps even more efficiently than we do - not sure why we'd be any different than Cleveland, Chicago and Denver where development is exploding apparently without an urban renewal authority.
I have 100% confidence that the city would be fine - and in fact better off - without the BRA and their function simply filled by a city agency.
So the BRA...
So the BRA is self funded and the cut they took on the debt in no way equates to public dollars? I'm okay with this.
Not one of Tom Menino's better projects
This was a Menino project, intended to help spur development near Boston Medical Center, along Melnea Cass Boulevard. When it was announced, in 2002, it was hailed as one of the largest minority-led development projects in the country.
You may recall that Dianne Wilkerson got nabbed taking bribes (from a "cooperating witness") to secure a liquor license for a proposed club in the development.
Life imitates Seinfeld again.
To my recollection, it went something like:
Kramer: "it's all a write off for these big companies, Jerry!"
Jerry: "you don't even know what a write off is."
Kramer: "but they do - and they're the ones writing it off."
color me shocked
A hotel directly opposite the land of the barely living methed out dead cant turn a profit?
Great investment.
I had a colleague stay at this hotel once...
She kept texting me to come pick her up in "Crosstown." I kept asking what neighborhood she was in, and she kept responding "CROSSTOWN!"
How could you
All these comments and yet no one points a finger at the person responsible for this boondoggle, Thomas M. Menino?
Just did ...
Scroll up a few comments.
http://www.tripadvisor.com
http://www.tripadvisor.com/Hotel_Review-g60745-d320038-Reviews-Hampton_I...
Lots of okay-to-good reviews from people needing BMC, lots of bad reviews from people not realizing ambulances would be driving by all night. Seems like the hotel should focus on the medical-tourist dollar and specialize, they might be more successful.
And maybe they should also invest in soundproofing
if that is a consistent complaint.
They need to hang on a
few more years. That area is destined for redevelopment. There are a lot of developers that have been rooting for failure since the first shovel went in the ground. Menino secured this development as opportunity for the minority community. The hotel was the first minority owned hotel in the city. Lots of resentment from the elites.