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49 I Overview The Brighton neighborhood in western Boston is the site of the 15.48-acre Boston Landing at Allston/Brighton (Boston Landing) development. Boston Landing is a mixed-use development adjacent to the existing New Balance world headquarters building. The site is a former industrial area that once served as the regionâs largest stockyard and is located along the Massachusetts Turnpike. The site is being developed by NB Development Group, a subsidiary of New Balance and HYM Investment Group, LLC (Rocheleau, 2014). The projectâs anchor tenant, New Balance, already occupies a new 250,000 ft2 world headquar- ters building on the site and has moved about 700 employees to the new building as of September 2015 (Geller, 2015). The rest of the project includes (see Figure 17): â¢ A 650,000 ft2, build-to-suit, class A office space certified by LEED (Leadership in Energy and Environmental Design); â¢ A 140,000 ft2, 175-key boutique hotel; â¢ 65,000 ft2 of ground floor restaurant and retail space; â¢ A 325,000 ft2 state-of-the-art sports complex; â¢ 275 residential units; â¢ A commuter rail train stop on the Framingham/Worcester line that goes directly to Bostonâs South Station; and â¢ Public amenity space, usable open space, and pedestrian linkages. The estimated $500 million Boston Landing project includes a $25 million commuter rail stop that is primarily funded and built by New Balance. An additional $8 million of track and signal work will be funded by the Massachusetts Department of Transportation (MassDOT). The sta- tion will be on the MBTAâs east-west Framingham/Worcester Line. NB Development Group has also agreed to contribute $47,000 per year for 10 years for costs incurred by the MBTA for station maintenance, repairs, and replacements (Semuels, 2015). This project utilizes two value capture mechanisms: negotiated exaction and naming rights. II Regulatory II.A Boston Landing Parking Needs NB Development Group bought the property for its new headquarters and other develop- ments in 2009 and 2010. The intention was to move employees from its former headquarters nearby, consolidate other regional offices, and develop property for third parties. An additional objective was to create a center of sports entertainment and health and wellness with training A p p e n d i x B Boston Landing at Allston/ Brighton Station, Boston, MA
50 Guide to Value Capture Financing for public Transportation projects facilities for two of New Englandâs major sports franchises, the Boston Bruins hockey team and the Boston Celtics basketball team (as discussed later in this appendix). NB Development Group realized that it could not obtain approvals for the amount of park- ing needed given the expected size of the full build out. Furthermore, it felt that it would be too expensive to build the required structured parking (Personal communication, 2016). Therefore, the commuter rail station was an important element in realizing the entire project. II.B Station Planning and Development The station has been subject to various transportation planning and long-term planning studies. In 2009, MassDOT identified the location as one of two preferred locations for a new commuter rail station in the area as part of the legislatively mandated Allston Multi-Modal Station Study (MassDOT, 2012). Until the 1960s, there were three stations in the area on the same line that is now MBTAâs commuter line from South Station in downtown Boston to Worcester. The new commuter rail station was proposed as part of the Boston Redevelopment Authorityâs Brighton Guest Street Planning Study of 2012. The study stated that to support the first 500,000 to 700,000 ft2 of development in the area, new transportation infrastructure would be required (Boston Redevelopment Authority, 2012). The financial position of the Source: Boston Redevelopment Authority, 2015. Figure 17. Boston Landing master plan.
Boston Landing at Allston/Brighton Station, Boston, MA 51 MBTA, however, was such that a new station for the Brighton neighborhood was deemed unlikely (Semuels, 2015). The station has been designed according to all public agency standards and constructed using a management plan approved by MassDOT and other relevant federal, state, and local agencies (MassDOT, 2012). III Market Considerations NB Development had four considerations in developing Boston Landing and funding most of the Boston Landing Station: â¢ To have more space to allow for expansion of New Balance as it grew and allow for consolida- tion of other offices, providing the current workforce, which primarily commutes by car, with a transportation alternative; â¢ To attract a more youthful workforce that prefers to work in locations that are accessible to transit, bike, and pedestrian facilities; â¢ To associate the New Balance brand with leading New England and national sports teams; and â¢ To provide attractive transportation alternatives for the office, retail, and residential devel- opments, offer an attractive environment for a younger workforce (as for the New Balance headquarters), and associate the location as a sports entertainment center. The ice rink will be leased out to the Boston Bruins at certain times, with the Bruins expected to allow the general public to watch their practices. At other times, NB Development Group will make the rink available to other sports groups and the general public. New Balanceâs Warrior Hockey brand will benefit from naming rights for the facility (Switaj, 2016). New Balance opened its new headquarters in 2015. Boston Landing Station is projected to be finished by 2017. The other elements of the projectâsports facilities, offices, residential, retailâ are expected to open by 2018 (Geller, 2015). Because the real estate project (as depicted in Figure 18) is not fully built out, it is too early to determine whether NB Development Group has received an adequate return on investment for the new station. Because of brand benefits from the entire real estate development, it may be difficult to ever separate the impact of the station from the business case for the develop- ment. The Boston Landing Station, and possibly the entire development, benefits from being primarily owned by Jim Davis, the CEO of New Balance Athletics and the primary owner of NB Development Group; a longer-term view can likely be taken since both companies are privately held. IV Coordination and Partnership In 2012, NB Development Group signed a letter of intent with the former Secretary of Trans- portation to largely fund the station with its own monies, to turn it over to the MBTA on comple- tion, and to make payments toward station maintenance for the first 10 years. The maintenance agreement also gives NB Development Group station naming rights during that period. While NB Development Group was responsible for all design and construction of the station, it was required to follow all state and federal construction standards. This required close coor- dination with the MBTA, Massachusetts Department of Transportation, Keolis (the operator of the commuter line under contract with MBTA), and the active users of the adjacent tracks, including Amtrak and CSX.
52 Guide to Value Capture Financing for public Transportation projects The station construction presents challenges due to: â¢ A physically constrained site and the need to maintain commuter rail and freight operations, â¢ Required coordination with multiple other projects on the Worcester line in order to minimize impact on rail service, and â¢ The MassDOT Highway Divisionâs work on the Everett Street bridge and electronic tolling on the Mass Pike (MBTA, 2016). V Business Case and Financing The Boston Landing Station is largely funded with NB Development Group monies, with an estimated $25.3 million covering the vertical construction and $0.8 million of that amount provided by MassDOT. Furthermore, MassDOT agreed to provide $8.3 million in horizontal station signal work and associated track/signal work for the Worcester line. NB Development Group will also be providing $470,000 for maintenance ($47,000 per year for 10 years) after station completion. The involvement of MassDOT in funding some of this work reflects that (1) some track improvements are to the entire line and not just the station and (2) NB Developmentâs expertise is in managing structures and not heavy rail infrastructure (Personal communication, 2016). Since NB Development Group procured the contracts, it would not be eligible to receive any federal funding for the project were any to be available. NB Development may receive some financing assistance from the Commonwealth of Massachusettsâ I-Cubed program (Massachu- setts Executive Office of Administration and Finance, 2016). This program provides financing for economic development projects. The financing is to be repaid by property assessments from the projects, with support from the respective municipality. It has partially financed another infill transit station project, the Assembly Square Orange Line station, in Somerville, MA. That Figure 18. Boston Landing rendering. Source: Rocheleau, 2014.
Boston Landing at Allston/Brighton Station, Boston, MA 53 project was led by state agencies, including the MBTA and the City of Somerville, but also received a contribution from the major developer (City of Somerville, 2016). VI Takeaways There are several takeaways for others contemplating similar value capture projects: â¢ Private financing to support public need: Building a new commuter rail station in the vicin- ity of Boston Landing had recently been contemplated by planners, but funding was not available given the MBTAâs other, more urgent state-of-good-repair needs. That a developer would help fund a transit station is not unique and in fact occurred with another Boston-area project, the Assembly Square project several years earlier. What is unique is that NB Develop- ment Group is funding all of the vertical elements of the project, making up more than two- thirds of the cost. Benefits from station development were determined to be closely aligned with the public policy objective of providing alternative transportation access. â¢ Long-term benefit and TOD premium: The developerâs investment in the station will yield benefits over time, potentially many years, until the project has been fully built out and is a well-established business, hospitality, retail, residential, and sports entertainment destina- tion. The harder-to-estimate return on the real estate development could be characterized as the TOD premium (discussed earlier in the guide). The value of the transit component is complicated by the fact that New Balance seeks to portray itself as a leading-edge, youthful firm associated with national sports teams and health and wellness. Some of the value of the station accrues to the New Balance brand and not necessarily to an easily calculated real estate bottom line. â¢ Private infrastructure procurement advantages and disadvantages: Unlike most value capture projects in which the developer contributes to a transit agencyâs effort to build a sta- tion or transit line, NB Development Group is responsible for delivering most of the transit infrastructure, through a form of publicâprivate partnership. As a privately constructed project, there may be advantages in cost and schedule, yet the project cannot access federal funds were this to be needed.