Credit crisis bites Filene's development
Builder says funding woes to delay restart of project
Despite cutting seven floors off his $700 million Filene's redevelopment, John B. Hynes III is still struggling to obtain loans for the 32-story tower in downtown Boston and will not be able to resume construction next month as he had planned.
Without funding for the entire project, the Filene's developers are now considering several other options to move forward on the office, hotel, and retail development, said an executive with knowledge of its finances.
Hynes's firm, Gale International, is developing the Filene's block in partnership with Vornado Realty Trust of New York. Spokesmen for Hynes and Vornado did not return calls seeking comment.
The builders stopped construction in November after they were unable to raise enough financing to build the entire project as conceived. Since then, Hynes and Vornado proposed the reduction in height to 32 stories, and eliminating all 166 planned condominiums.
The development site, at the corner of Washington and Franklin streets, consists mostly of a hole in the ground in the middle of Downtown Crossing, and the skeletal remains of several other buildings, including the original Filene's department store.
The project is one of many caught up in the credit crisis and economic downturn that have virtually stopped any lending to commercial developments. Lenders are reluctant to finance projects as long as the soft economy hurts retailers and other potential tenants. Moreover, banks and insurance companies that also fund such developments are struggling with their own losses, making them reluctant to lend, even after the federal government has provided $700 billion in assistance to stimulate lending.
Gale and Vornado have invested more than $150 million in the development and previously had commitments from other lenders before the deal came undone last fall.
A top official with the Boston Redevelopment Authority, the city's planning arm, said the agency remains in close contact with the developers.
"This is affecting a lot of projects, not just in Boston, but everywhere," said BRA director John Palmieri. He said the BRA has not yet scheduled a board vote needed to approve the proposed revisions to the Filene's project.
The delay is putting a hole in Mayor Thomas M. Menino's effort to revitalize Downtown Crossing and creating problems for potential tenants who were relying on the developers to finish on time.
A representative of Filene's Basement, which hopes to move back this year, said the store is closely monitoring progress. "Our understanding is that either in the fall of 2009 or spring 2010, the developer will be providing us with the property," said Julie Davis, an attorney for the discount retailer. "We don't have any news from the developer."
Another potential tenant, the law firm Fish & Richardson, said it still has a letter of intent to move into the building in 2011, but is weighing other options if the delays persist.
Casey Ross can be reached at cross@globe.com. 
