- Briefing Room
|Project Borrower / Sponsor||
Massachusetts Turnpike Authority
|Value Capture Techniques||Right-of-Way Use Agreements|
Highway and Local Road
Copley Place is a $400 million mixed-use development project built on a 9.5-acre land-air parcel above the Massachusetts Turnpike in Boston, Massachusetts. Developed between 1977 and 1984, the complex includes two major hotels with 1,949 rooms and a convention center; a 385,000-square-foot retail center with two department stores, shops, restaurants and cinemas; 800,000 square feet of office space; 100 units of mixed-income housing; and 1,432 parking spaces.
The land below Copley Place was cleared in the late 1950s for the construction of the Massachusetts Turnpike Extension. It includes a major interchange connecting the Turnpike to Boston's Back Bay neighborhood, as well as freight and intercity passenger rail lines. The complex is located on a deck above these important transportation facilities. The project rejoins the Back Bay and South End neighborhoods, which were divided for two decades by the interchange and train lines.
Urban Investment and Development Co. (UIDC), a Chicago-based subsidiary of Aetna Life & Casualty, was the developer of the Copley Place site. UIDC expressed its interest in developing the site to the Commonwealth of Massachusetts in early 1977. The company had an established track record and had recently completed the 74-story Water Tower Complex in Chicago. In April 1977, with the approval of Governor Michael Dukakis and the State Planning Director, the Massachusetts Turnpike Authority granted UIDC a six-month option period to prepare a proposal to develop the property. UIDC was also aligned with Western International Hotels, which was committed to developing an 800-room luxury hotel on the site.
The State engaged the City of Boston in oversight planning, with the Boston Redevelopment Authority acting as the City's representative. The State also established a Citizen Review Committee (CRC) with representatives from adjacent neighborhoods representing a wide array of affected communities to advise on the development plans.
UIDC settled on a preferred design in June 1978, which was then the subject of an environmental review. This analysis coincided with a series of seven workshops conducted by the CRC to review and contain the effects of the development on neighboring communities. Upon the release of the Draft Environmental Impact Report in October 1978, UIDC and the state negotiated to agree upon lease terms prior to the end of the Dukakis administration. They agreed on a rate schedule for a 99-year lease and an affirmative action commitment that 20-25 percent of construction jobs would go to minority residents. The State and UIDC negotiated successfully and signed a lease agreement on December 22, 1978.
UIDC then entered negotiations with the City of Boston and the CRC to gain local support and approval for the project. This process would ultimately extend over 23 months. One of the key elements was the City agreeing to apply to the US Department of Housing and Urban Development for an Urban Development Action Grant (UDAG). The UDAG program was established during the Carter administration to encourage investment of private capital in urban centers.
It had been recognized since 1978 that UIDC would need public funding to cover the significant site preparation costs involved with bridging the highway ramps and rail lines below the development. The City of Boston proposed that the UDAG be comprised of a $15.5 million loan and $3.3 million grant. UIDC would begin repaying the loan once the project was complete and generating revenue. The loan repayments would generate $42 million in recycled federal funds over a 27-year repayment period. This money would be put into a Neighborhood Development Fund overseen by the City Council and would be spent exclusively in areas impacted by the Copley Place development. These areas were identified through new housing and retail impact studies, and related CRC taskforces.
The CRC review process was extremely thorough and UIDC ultimately addressed the CRC's concerns by including 100 units of mixed-income housing, paying to realign Stuart Street to the south to enlarge the development site of one of the hotels, and improving vehicular and pedestrian access around the site. The Stuart Street realignment required the City of Boston to transfer the necessary right-of-way to the Massachusetts Turnpike Authority so that it could be included in the development site. The City Council approved the transfer on November 5, 1980, and UIDC held tis official groundbreaking on November 13, 1980.
The developer holds a 99-year lease with the Massachusetts Turnpike Authority and paid $1,200,000 in annual rent from February 1992 to February 2002. These payments were made from an escrow account holding a security deposit in the form of U.S. Treasury Bonds earning an interest rate of 7 5/8 percent, due February 15, 2007, callable not early than February 15, 2002, paying interest at an annual rate of not less than $1.2 million and having a total par value at maturity of not less than $15.8 million. In February 2002, the bonds were delivered to the Massachusetts Turnpike Authority and the annual lease payment was reduced to $1.00 a year through the end of the lease term in 2077.
The ownership of Copley Place has changed multiple times since the project was completed. JMB Realty purchased UIDC from Aetna for $1.4 billion in 1984 and became the owner of the newly opened Copley Place among other assets. In 1996, JMB announced its intent to sell the retail, office and parking components of the Copley Place development. These assets were purchased by Overseas Investment Corp, a Bermuda-based investment company controlled by United Parcel Service, Inc. for $300 million, one of the largest real estate transactions of the 1990s in Boston. In 2000, Copley place was purchased by Rodanco North America. Two years later the Dutch company sold off its North American assets to three different companies. Simon Property Group purchased the retail components of Copley Place at that time and continues to operate the development. Simon Property Development gained approval to build a new 660,000 square foot residential tower on the site, but has scrapped plans for the new building. It is adding 112,000 square feet of new retail, restaurant and atrium space to the development.
|Project Delivery / Contract Method||
Urban Investment and Development Co., a Chicago-based subsidiary of Aetna Life & Casualty
|Project Advisors / Consultants||
Hotel Architect - The Architects Collaborative, Inc.
Hotel Contractor - Turner Construction Company
Retail/Office Architect - The Architects Collaborative, Inc
Retail/Office Contractor - Perini Corporation
Lead Banks - Morgan Guaranty Trust Company, The First National Bank of Chicago, and Citibank
Participating Banks - The First National Bank of Boston, Security Pacific National Bank, Los Angeles, and Seattle First National Bank
|Duration / Status||
Construction began on November 13, 1980 and was completed in 1984
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