231-922-9460 | Google +

Wednesday, March 10, 2010

Builder: No ‘blackmail’ at Filene’s

Boston Herald
The co-developer of the stalled Filene’s project said his team is not leaving a giant hole in Downtown Crossing to extract public money for the project.

“We have asked the city for help, but there’s a big difference between asking for help and trying to blackmail them,” said John Hynes, CEO of Gale International. “We have done nothing but try to find a financing solution. It’s never been our strategy to deliberately put the real estate in bad condition.”

[Photo: John Hynes]

Hynes’ comments yesterday come on the heels of an angry letter Mayor Thomas M. Menino sent to Vornado Realty Trust, the lead developer, threatening to seize the gutted landmark in Downtown Crossing by eminent domain after its chairman, Steven Roth, said he left the site of a former Alexander’s store in Manhattan vacant and blighted to extract taxpayer money for the project.

In the letter, Menino wrote “The notion that you would purposefully cause this to occur - not due to financing difficulties or other problems beyond your control, but as an intentional cynical ploy to extract concessions from the public sector - is inexcusable.”

Roth did not return calls seeking comment. But Hynes insisted yesterday that he is unaware of any tactic by Vornado to let Filene’s fall into disrepair as a way to convince officials to come up with cash to jump-start the project.

If Menino wants to take the Filene’s property by eminent domain, the process could be completed in a few months - but the cost could be prohibitive, according to real estate attorneys.

A 2005 U.S. Supreme Court decision expanded the government’s authority to take private property by broadening the definition of “public use.” Historically, governments used the power to build roads and schools. But in a case that pitted a group of Connecticut homeowners against City Hall, the court ruled the city can demolish homes in favor of a mixed-use project because the development served a “public purpose” of boosting economic growth that outweighed homeowners’ property rights.

“It was a groundbreaking case,” said Kurt Kusiak, attorney at Sally & Fitch in Boston. “The New London case was an instance that involved taking private property and giving it to a private developer.”

But Kusiak said if the mayor and City Council approved taking Filene’s, the biggest fight would be over the price of the property because the city would be required to reimburse the owners at “fair value.” Vornado paid $100 million for Filene’s in 2007, but its true value could be more than $200 million because Vornado has approval for a 1-million-square-foot office tower at the site.

John Palmieri, director of the Boston Redevelopment Authority, said real estate values have fallen and the parcel may not command such high prices today. He said eminent domain is only one option the city is considering to get the project completed. Vornado and Gale’s construction permits expire in August.

“We would consider an amended proposal if they come to us with a plan that they can fund and we feel makes sense for that neighborhood,” he said.