In real estate, chasing money's the game

Mayor plans a $40m loan initiative to restart stalled development projects

‘I want projects that are ready to go now,’ Mayor Thomas M. Menino says, commenting on how loans would be used.

Boston Mayor Thomas M. Menino yesterday said the city will provide $40 million in loans to stalled development projects, hoping to restart construction of billions of dollars worth of office towers and retail stores that have been delayed because of the credit shortage and soft economy.

The program, to be funded with federal grants, would fill gaps in financing for approved projects that have failed to move forward because they can't get construction loans. The slowdown has cost the city thousands of construction jobs, Menino said, as well as millions of dollars in unrealized tax revenue.

The mayor said the city will target projects on which work could begin immediately, such as the $700 million redevelopment of the Filene's block in Downtown Crossing. Construction on it was stopped last month because of a $50 million to $100 million financing shortage.

"I want projects that are ready to go now," Menino said. "I believe we could have some of them in the ground and starting construction within four months."

City officials are still deciding the size of the loans, which projects could qualify, and whether the funds should be used for projects across the city or concentrated on the largest developments downtown.

The developer of the Filene's project, John B. Hynes III, said a loan could help him cobble together enough other money to resume construction.

Hynes said he will soon present a revised development plan that slices several floors off a previously proposed 38-story tower by eliminating plans for 166 condominiums.

"The residential portion is going to have to go away," Hynes said, adding that he is working to determine how many floors of condominiums to eliminate and how many will instead be built for office space.

The city program relies on so-called Section 108 funds administered by the US Department of Housing and Economic Development that typically support development in distressed neighborhoods. In 2003, Boston obtained HUD's approval to use the money to assist in the development of luxury hotels, however.

Menino said he is seeking to replicate the success of that program, which assisted in the development of four hotels. Only one, the Westin Waterfront, accepted a $15 million loan; the Mandarin Oriental, the Liberty Hotel, and another hotel at Battery Wharf used the availability of the loans to leverage private funds, but did not ultimately accept the money, officials said.

The new loan program will be administered by the city's Department of Neighborhood Development, which will spend the next few weeks seeking approvals and developing criteria for distributing the money. City Council approval is needed for the loan program to take effect.

Other examples cited by Menino are:

Kensington Place, a 457,000-square-foot residential, retail, and office project on Washington Street in Chinatown that has failed to move forward since receiving initial city approvals in 2003.

Fan Pier, on the South Boston Waterfront, where developer Joseph Fallon is seeking money to start construction of a second office tower.

Fallon today is planning an event to mark the topping off of construction of the first office building there.

Casey Ross can be reached at cross@globe.com.