Banker & Tradesman: Oct. 7, 2019

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THE FINANCIAL SERVICES AND REAL ESTATE WEEKLY FOR MASSACHUSETTS

BY THE NUMBERS

PAGE 6

County close-up: Barnstable Spotlight: Wellfleet

IN PERSON

PAGE 8

Unlike many architects, Jamie Kelliher started his career in the building trades, first as a framer and a cabinetmaker before branching into other finishing trades. Kelliher is the second person in his family to help lead Hanover-based Axiom Architects, a firm his father James Kelliher founded over 40 years ago.

WEEK OF MONDAY, OCTOBER 7, 2019

RESIDENTIAL REAL ESTATE

BY THE NUMBERS

4,613 The number of homes in Wellfleet.

See By the Numbers on page 6.

Source: U.S. Census Bureau

$5.25 million The price of the most expensive home in this week’s Gossip Report.

See page 9.

Source: The Warren Group

$15,000 The amount parents can give their children tax-free, helping first-time homebuyers. See Lew Sichelman’s column on page 4.

Source: IRS

Massachusetts legislators are considering data privacy legislation modeled on California laws. With technology at the core of banking today, lenders of all stripes could be affected.

B EX ACON HILL XX

MASSACHUSETTS

DATA PRIVACY BILL WOULD AFFECT BANKS

10 percent Massachusetts condominium prices grew by 10 percent in August. See Scott Van Voorhis’ column on page 3.

Source: The Warren Group’s Statistics Module

$549,000 The median home price in Wellfleet.

See By the Numbers on page 6.

Source: The Warren Group’s Statistics Module

2,186 square feet The size of the most expensive home in this week’s Gossip Report.

See page 9.

Source: The Warren Group

12th December can be an excellent time to sell a home. See Lew Sichelman’s column on page 4.

Source: Rae Catanese, RE/MAX

-8.2 percent Condominium prices dropped 8.2 percent in New York in August. See Scott Van Voorhis’ column on page 3.

Source: Douglas Elliman

Unless otherwise noted, all data is sourced from The Warren Group’s Mortgage Market Share Module, Loan Originator Module, Statistics Module

Financial Industry Concerned About Impact

BY DIANE MCLAUGHLIN BANKER & TRADESMAN STAFF

B

anks and credit unions could face additional regulations as state legislators seek to govern what companies do with consumer information in the absence of federal standards.

Last year, California passed the nation’s first comprehensive consumer data pri-

vacy law, and state Sen. Cynthia Creem has introduced a bill on Beacon Hill to bring similar regulations here. With technology now integral to the banking industry’s products and services, the proposed legislation will have an impact beyond the tech companies whose behavior dominates the data privacy debate.

The Joint Committee on Consumer Protection and Professional Licensure is scheduled to hold a hearing on several consumer-related proposals on Monday, Oct. 7, including Creem’s bill, S.120. The bill is cosponsored by Sen. Jamie Eldridge

(D-Acton) and Sen. Michael Moore (DMillbury). Rep. Tommy Vitolo (D-Brookline) is carrying its counterpart in the House of Representatives.

Modeled after the California Consumer Privacy Act, which was passed in 2018 and goes into effect in January, S.120 would require companies to notify customers what types of data have been collected, the business purposes for using the data, the categories of third parties that will receive the data and the business purposes for disclosing data to third parties.

COMMERCIAL INTERESTS

C H A L L E N G I N G C L I M AT E

While New York and Los Angeles Stutter, it’s Business as Usual Here

Climate Change-Driven Flooding Spurs Cities to Plan New Zoning

Boston’s Luxury Market Hardly Headed for a Crash

By Scott Van Voorhis | Banker & Tradesman Columnist

To Keep Rising Waters at Bay, Developers Play Defense

By James Sanna | Banker & Tradesman Staff

and/or proprietary database. For more information please visit www.thewarrengroup.com/business/ datasolutions.

Continued on Page 9

Commercial Real Estate PAGE 3

Commercial Real Estate PAGE 7

2 | BANKER & TRADESMAN

OCTOBER 7, 2019

The Week on the Web

Timothy M. Warren Jr., CEO and Publisher David B. Lovins, President and COO

BANKER & TRADESMAN

A ROUNDUP OF OUR MOST POPULAR STORIES FROM THE PAST WEEK

Published by The Warren Group

LONGTIME BOSTON BANKER WILLIAM MORRISSEY DIES

ESTABLISHED 1872

PUBLISHING

Associate Publisher: Cassidy Norton Managing Editor: James Sanna Associate Editor, Commercial Real Estate: Steve Adams Associate Editor, Banking: Diane McLaughlin Contributing Writer: Scott Van Voorhis Audience Solution Specialist: Sarah Ahlgren Client Services Assistant: Victor Salvo Advertising Account Manager: Steve Ketler Graphic Designer: William Samatis

DATA SOLUTIONS

Director of Sales & Marketing: John Bottini Communications Manager: Mike Breed Executive Data Solutions Account Manager: William Visconti Data Solutions Account Managers: Chris Mirakian, Peter Sullivan RE Records Search Client Specialist: Jenell James

INFORMATION SERVICES

Director of Operations & Product Strategy: Samantha Bullock Data Operations Supervisor: Tammy Dandurant Data Vendor Coordinator: Tracey Kelley Data Quality Auditor: Ellen Gendron Acquisitions Coordinator: Linda MacDonald Transaction Acquisition Coordinator: Wally Bullock

• The former president of Somerville’s Central Cooperative Bank and chair of the Federal Home Loan Bank of Boston’s board of directors was 91.

• Morrissey worked in residential mortgage lending at Boston Five Cents Savings Bank, one of the region’s leading lending institutions at the time.

• According to his obituary, published in the William Morrissey Boston Globe, Morrissey met often with “not-so-credit-worthy” borrowers. At a celebration of his career, the program noted: “Scores of now successful, solid citizens were able to purchase their first home only because Billy Morrissey listened to their story and took a chance on them.”

CAPE COD 5 NAMES BERT TALERMAN AND MATT BURKE CO-PRESIDENTS • “This organizational realignment provides professional growth opportunity for these outstanding leaders, as well as other members of our senior team. With the full support of the entire board, these promotions are a natural evolution of our executive team, as our institution has grown significantly in size, scale and complexity,” Chair and CEO Dorothy Savarese said in a Bert Talerman statement.

• Talerman, who joined Cape Cod 5 in 2007, will oversee all customer-facing areas, including commercial, residential and consumer lending; banking services; and wealth management services. Burke joined the bank in 2012 and will have oversight of accounting and finance, data analytics, information technology management, Matt Burke digital, project management, strategic support and facilities.

• Savarese will continue as CEO and chair of Cape Cod 5. In addition to leading strategy and oversight for all areas of the bank, she will maintain direct management of the executives in the areas of human resources, training and development, marketing, corporate communications, community engagement, information security, risk management, fraud prevention, legal and governance.

INFORMATION TECHNOLOGY

NATIONAL DEVELOPMENT SUBSIDIARY PLANS TO COMBINE WITH PARENT

Senior Applications Developer: Joe Chan Software Developers: Michael Paul, Mark Wearsch

FINANCE & ADMINISTRATION

Controller: Gena Salvo Accounts Payable: Olga Khalaydovsky Human Resources Manager: Linnea Blair HR Coordinator: Andy Wells Office Manager: Nicole Tower

BANKE R & TR AD ESMA N

SUFFOLK WANTS TO HOUSE 280 STUDENTS IN ‘BOSTON’S FIRST SKYSCRAPER’

• Charles River Realty Investors has closed its fourth fund after raising $400 million and will be combining with its Newton-based parent to form a vertically-integrated real estate investment, development, construction and operating company.

• The combined firm will be known as National Development, with Brian Kavoogian becoming a managing partner and a member of the firm’s executive committee. He will continue to have a primary focus on the firm’s new investment activity. Going forward, National Development said it plans no changes in its approach and strategy, with a focus on creating great places and providing its investors with attractive risk-adjusted returns.

• Suffolk University bought the former boutique hotel for $61.7 million last month.

• The 5,428-student university wants to offer on-campus housing to 50 percent of its undergraduates. It currently provides 1,607 beds, while it aims to grow its undergraduate student body to 5,712 by the 2029-2030 school year.

• In a Boston Planning & Development Agency filing, the school said it was looking to work with “external parties” to develop more student housing in the city. The school already owns or leases about 1.5 million square feet in 13 buildings.

PROPOSED ZBA REVAMP MET WITH SKEPTICISM • Boston City Councilor Lydia Edwards’ proposal contains three main thrusts: Remove real estate and construction industry representatives from the board, make it easier for the public to follow – and appeal – ZBA decisions and make developers seeking variances submit plans on how they will mitigate displacement of their project site’s current residents.

• “We applaud the city for retaining Sullivan & Worcester to review the ZBA and we look forward to reviewing their findings,” NAIOP-MA CEO Tamara Small said in an email. “We believe that such dramatic changes to the ZBA, based on the actions of two individuals, is not prudent at this time. Furthermore, we are deeply concerned about a ZBA that would ban anyone with real estate experience from serving as a member. Given the technical nature of the work of this board, an understanding of real estate development, construction and design are absolutely essential for board members.”

• Edwards’ home rule petition would first have to be passed by the Boston City Council before then being passed by the state legislature.

HERE’S WHAT YOUR PEERS WERE INTERESTED IN LAST WEEK: Holyoke Affordable Housing Complex Lands Final Financing

2

Boston City Councilor Pitches Plan to Remove Industry from ZBA

3

75 State St. Sells for $635M

They’ll probably be dead by 34% No. the time seas rise too far.

4

Suffolk Wants to House 280 Students in ‘Boston’s First Skyscraper’

They’ll still spend too 31% Yes. much rebuilding after storms.

5

Cape Cod 5 Names Talerman and Burke Co-Presidents

Those homes are over21% Yes. priced given their long-term

6

Canton Woman Charged in Real Estate Email Scheme

(ISSN 0005-5409)

Volume 200, Number 40 Published each Monday. ©2019 The Warren Group Inc., 2 Corporation Way, Suite 250, Peabody, MA 01960. All rights reserved.

No part of this publication may be reproduced without the written consent of the publisher.

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POLL RESULTS

1

7

National Development Subsidiary Raises $400M, Plans to Combine with Parent

8

Brighton Multifamily Project Called Symbol of Housing Crisis

9

Longtime Boston Banker Morrissey Dies

10

Trump’s Windmill Hatred Causes Concern Among Industry

Banker & Tradesman readers aren’t quite ready to throw in the towel on pricy coastal homes.

Are buyers of waterfront homes making a bad choice?

futures.

They’re getting in while 14% No. they still can!

OCTOBER 7, 2019

BANKER & TRADESMAN | 3

COMMERCIAL REAL ESTATE COMMERCIAL INTERESTS

Boston’s Luxury Market Hardly Headed for a Crash While New York and Los Angeles Stutter, it’s Business as Usual Here

BY SCOTT VAN VOORHIS BANKER & TRADESMAN COLUMNIST

H

ome flippers, investors and just plain everyday buyers across Boston and its many suburbs must have missed the memo.

While rest of the country is finally waving goodbye to the Great Real Estate Boom of the 2010s, we’re still acting like it’s 2015, forking over gobs of money for ever-pricier singlefamily homes and condominiums.

Even as prices and sales flatline in oncered-hot markets like New York, Los Angeles and San Francisco, the Boston area will see another round of increases, according to a new forecast by financial firm UBS. Still, before you pop the champagne, you may want to consider the context here, for the data comes from a UBS price survey with a rather ominous title: the “Global Real Estate Bubble Index.”

It’s not the kind of test you want to rack up a big score on.

With that in mind, I got on the phone last week Jon Woloshin, real estate and lodging analyst at UBS. While UBS has labeled its survey the “bubble index,” Woloshin apparently doesn’t think much of the title, arguing the study really is

about whether homes and condos are overvalued or not in various markets.

From Woloshin’s perspective, real estate values are surging again in Greater Boston but not because there is a looming price or asset bubble.

Rather, it’s because Massachusetts has been able to shed its old “Taxachusetts” label from decades ago and become an attractive alternative to businesses fed up with rising taxes in Connecticut, New York, and New Jersey.

“On a relative basis, Boston has become much more business-friendly,” the UBS analyst said. “Boston is well-positioned in terms of growth.”

Plenty of Techies Willing to Pay

Woloshin has a point, with GE just one of a number of big firms across an array of industries that have either relocated here or rolled out big expansion plans.

There are certainly more techies and biotech researchers here than ever before, putting down big money for Cambridge condos and Needham McMansions alike and helping drive up prices across the board.

The UBS analyst sees home prices in the Boston posting further gains, and at the very least, beating the national average, which now stands at 3 percent.

The latest report from The Warren Group, publisher of this newspaper, bears this out.

The median price for a home in Massachusetts jumped 4.7 percent to $420,000 in August, an all-time high.

Median condominium and co-op prices in Manhattan plunged 8.2 percent in August while sales fell even faster, dropping 14.2 percent. But Boston has trends to support continued price growth.

Condo prices positively spiked – shooting up nearly 10 percent – $401,000, also an alltime high for August.

“I think Boston outperforms Los Angeles and New York and San Francisco,” Woloshin said.

Other Markets Outgrew Demand

By contrast, things are looking scarier by the month in other coastal markets.

Median condo and co-op prices in Manhattan plunged 8.2 percent in August, to $1,025,000, while sales fell even faster, dropping 14.2 percent, according to Douglas Elliman.

Units sat on the market for 152 days on average, the longest since 2012, in the aftermath of the Great Recession.

Continued on Page 10

Filled with new towers like the 60-story One Dalton, Boston may look like an urban wonderland, but all that glitters isn’t necessarily golden. It’s an open question how many condos in in these buildings are sitting empty after being snapped up by investors and flippers looking for a quick buck.

IBEW Local 103 and NECA Electrical Contractors

POWERING

BOSTON

4 | BANKER & TRADESMAN

OCTOBER 7, 2019

OPINION EDITORIAL

EDITORIAL CARTOON

Edwards’ ZBA Reform Plan Could Paralyze Housing Construction

W

hatever the solution is to preventing corruption at Boston’s Zoning Board of Appeals, City Councilor Lydia Edwards’ proposal is not it.

The district councilor for Charlestown, East Boston and the North End suggested last week that Boston should ban all members of the construction and real estate industries from the board, and would let the city in the future bar members from taking part in the industry for up to five years after leaving the board.

History shows largely self-regulated industries invariably wind up hurting the common good in pursuit of profit, and a revolving door between regulators and industry is a sure-fire way to foster corruption.

However, the board’s decisions are so complex and technical that throwing amateurs and neighborhood activists into the deep end may well cause the board to grind to a halt. Urban planners and “experts in zoning” would be allowed on the board under Edwards’ plan, but as anyone who has worked in development knows, academic knowledge of the topic is simply no substitute for the experience gained from wrestling with problems of bringing product to market in the real world.

What harm could that cause, a reasonable person might ask? Surely exceptions to the city’s development rules must be thoroughly vetted before being granted.

Unfortunately, in many cases the city’s zoning code and the planners who write it have proven unable to keep up with changing market realities and to balance society’s needs with voters’ natural resistance to change.

Projects like a 35-unit apartment building recently proposed to replace a vacant nursing home on a 0.38-acre corner lot in Brighton must still go before the ZBA because the land is still only zoned for two-family homes as though the date was still 1927. This, despite the lot sitting roughly halfway between two Green Line branches in a popular area which needs more housing to prevent rents and purchase prices from rising further.

Were the ZBA to seize up or slow down significantly, many developers would be forced to abandon many perfectly sensible projects, crippling Boston’s ability to grow its housing stock. As recent Census Bureau data shows, the city is producing just under two-thirds of all the region’s new homes.

Absent a thorough revamp of Boston’s zoning and concessions on density and height from the kinds of older, better-off homeowners who tend to dominate neighborhood groups and public meetings, proposals like Edwards’ will always be nonstarters for the housing construction industry and anyone who realizes the public sector neither has the will, the appetite nor the power to solve Greater Boston’s housing crisis.

As Boston continues to seek a way forward to prevent corruption, more accountability, transparency and better ethics rules are clearly needed on the ZBA. And something drastic must be done to regain public trust lest voters throw the baby out with the bathwater in the next election or a subsequent one.

But Edwards’ proposal won’t work as it stands now.

Banker & Tradesman Cassidy Norton

Associate Publisher c n o r to n @th e w a r r e n gr ou p . c om

Timothy M. Warren Jr.

Publisher T i m o t h y M. W a r r e n

Publisher 1975-1988 Keith F. Warren

Publisher 1928-1975 W i l l a r d C. W a r r e n

Publisher 1901-1928

THE HOUSING SCENE

Believe It or Not, Holidays Are a Good Time to Sell Winter Has Advantages Over Chaotic Spring and Fall Buying Seasons

BY LEW SICHELMAN SPECIAL TO BANKER & TRADESMAN

H

ere come the holidays. Rosh Hashana just passed.

In a few weeks, Halloween will be upon us; four weeks after that, Thanksgiving. And before you know it, Chanukah, Christmas and New Year’s will arrive.

It’s the time of year for good cheer. It’s also the time of year when many sellers take their homes off the market or wait until January to list them. But the smart money says they’re wrong to do so.

For one thing, there’s usually less competition to attract would-be buyers during the holiday season. Busy with holiday parties, buying gifts and perhaps taking a family vacation, many sellers don’t have the time to make their homes ready for sale, so they don’t even bother.

But if they wait, other folks in the same boat will also be listing their houses. And before long, all of you could be vying for the same buyer.

Your Buyers Will Be Serious

People out looking at houses during the holiday season are not tire-kickers. They’re serious. They are just as busy as you are, but they’ve made buying a priority. Some need to find a place right away: Maybe they’ve been transferred into the area, for example. And since they won’t have much inventory to choose from, you might be able to sell quicker – and at a higher price.

Other potential buyers may be fat with money given to them for Christmas – not a hundred bucks or so, but serious money. After all, Mom and Dad can give a lucky relative up to $15,000 each, tax-free, in any given year.

Tampa, Florida, agent Rae Catanese of RE/MAX Bay to Bay says she sees this kind of thing “all the time” in her market.

The recipients will still have to account for the windfall with their mortgage company. Lenders these days want to know where every dollar comes from. But beyond that, a big-time gift goes a long way toward meeting down-payment requirements and/or covering closing costs.

Another reason the end of the year is a good time to sell is because it’s often a slow period for many real estate professionals. Sellers and buyers alike can expect to command the full time and attention of their agents – or at least, much more of it than if the agents were running around serving many clients during a busier season.

Unfortunately, it’s also a slow time for the many other professionals who provide the ancillary services you’ll need, should you end up striking a deal with an anxious buyer. And that could be a drawback, especially if your buyer must meet a certain timetable, such as closing by the end of the year.

Appraisers, title companies, home inspectors, surveyors and the like take time off, too. Some may be out of town visiting relatives, and some even close down com-

pletely for a week or more at a time. Ditto for insurance companies, recording offices and even lenders. Scheduling becomes an issue that must – but can be – addressed.

Decorations Help the Sale

But back on the positive side of the ledger, in many markets at this time of year, you don’t have to worry about keeping the grass cut or the shrubs pruned so your house makes a good first impression. You’ll still have to rake the leaves and keep the street, driveway and walkway clear of ice and snow. But probably not as frequently as mowing and yanking weeds out of your flower beds.

Inside, your holiday decorations will make the house festive and welcoming. Yes, you’ll have to keep the place tidy. But nothing is as inviting as holiday decor.

“Decorated homes engage the emotions,” says Debbie Reynolds of Platinum Properties in Clarksville, Tennessee. “Remember: Emotions buy.”

Busy with holiday parties, buying gifts and perhaps taking a family vacation, many sellers don’t have the time to make their homes ready for sale, so they don’t even bother.

You’ll still have to be flexible and prepared to show your place at a moment’s notice. But you’d have to do that anyway, no matter when you put your home on the market. So why not do it when the place shows itself off? Indeed, the holidays are probably the one time of the year when sellers can get by with minimal staging.

Finally, a few tips on selling during the winter in general, especially in cold-weather markets: • Open the curtains and blinds to let the natural light shine in. And turn on all the lights in every room to brighten up the place, especially on cloudy or dismal days.

• Provide convenient parking, either in your drive or on the street. People won’t want to climb a snowbank or take baby steps to avoid ice patches.

• Put a festive welcome mat at the front door, where visitors can wipe their feet or perhaps even leave their wet or salty shoes. Have slippers or disposable booties available, and a bench or chair where they can sit to make the exchange.

• Keep your own cold-weather gear out of sight.

Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at lsichelman@aol.com.

OCTOBER 7, 2019

BANKER & TRADESMAN | 5

OPINION H O U S I N G M AT T E R S

Affordable Housing and the Challenge of Becoming Climate Ready Resources Needed to Meet Mandates

BY SUSAN GITTELMAN SPECIAL TO BANKER & TRADESMAN

H

ousing in Greater Boston is expensive to build.

The costs of land, material and labor continue to be on the rise, seemingly with no relief in sight.

Energy efficiency, sustainability and resiliency measures – connected to addressing the real effects of climate change – are important elements for safeguarding the operations of multi-family housing.

A big question is: How can affordable housing be built to operate to high efficiency standards, enduring into an uncertain climate future?

In a few cases it is happening, but these are the exceptions. Currently, the resources available to achieve these goals are falling short of the costs to meet them.

Resources Fall Short of Goals

In general, developers struggle to secure the many sources of financing needed to build affordable housing. Equity raised through low income tax credits is still the main source of funding, and competition for those is fierce. There are targeted grant resources from agencies like the Mass Clean Energy Center and incentives from MassSave and others, but they are small in comparison to the expense.

On the cost side, to be competitive for these scarce resources, developers are responsive to many considerations, including meeting per-unit cost constraints while ensuring affordability levels and supplying a mix of unit sizes. They also must meet workforce goals and accessibility guidelines, satisfy building codes and “stretch codes” that call for better materials and construction techniques, and address more recent concerns about making buildings climate resilient.

“It’s not one thing that drives these costs,” a developer told me. “It’s cumulative. And if you miss the mark and go over budget, you have to cut somewhere.”

About a dozen states now include Passive House as a goal. Passive House, a set of practices and standards that originated in Germany, is desirable because its standards are generally higher than what are required by many states, including Massachusetts. It is considered a pathway to structures that are net-zero or even net-positive in their use of energy.

It’s not one thing that drives these costs. It’s cumulative.

And if you miss the mark and go over budget, you have to cut somewhere.

Pursuing goals such as the U.S. Building Council’s LEED standard or Passive House for multifamily housing adds cost to development in today’s market. Contractors often have to hire a specialist in the intricacies of meeting standards. Additional costs include added hours for design, plans that are more detailed, more meetings integrating design, mechanical and construction teams, and extensive modeling to make sure the building meets required performance thresholds.

While these goals are laudable, they add significant costs. Some say Passive House currently adds roughly $25,000 per unit.

Success Stories Show Need for Resources

In spite of the challenges, there have been some notable successes.

Homeowner’s Rehab, Inc., a Cambridge-based nonprofit owner and developer of affordable housing, is currently constructing Concord Highlands, which is described as the largest new affordable housing devel-

opment in that city in 40 years. It will provide 98 permanently affordable apartments.

The development “is aiming for the highest levels of resiliency and sustainability through high quality materials, energy efficient equipment, and a podium-style building structure to meet Enterprise Green Communities and Passive House standards,” HRI said.

But Cambridge is unusual in that it is committed to sustainability and is finding ways, through attempted zoning changes and leveraging its white-hot investment market, to help builders of affordable housing succeed.

These investments not only lower utility bills but also enhance the living environment and the building’s overall resiliency. An apartment building constructed with tight insulation, for example, will not only be cheaper to heat but also, in a time of extreme weather and power outage, retain heat for a much longer period, allowing residents to be comfortable for as much as four or five days, one experienced developer said.

For these reasons, there continue to be efforts in the design and construction industries to find cheaper ways to incorporate these changes to fulfill the broader mandate.

“Developers are responding to ever-increasing requirements,” one told me. “We are conscious of the costs it takes to get there.”

And there is a strong will within the affordable housing sector to further our climate readiness. Yet, while the benefits are becoming clearer, the question of how to pay for it in the context of our larger cost challenges is not so clear.

The recent climate events remind us of the urgency of bringing necessary resources to bear.

Susan Gittelman is the executive director of B’nai B’rith Housing, a nonprofit, affordable housing developer currently working in Boston, Sudbury, and Swampscott.

A BETTER CITY

How Frequent, Electrified Commuter Rail Can Help Solve Boston’s Traffic Woes Transportation Solutions Are Possible Through Regional Rail Service

BY RICK DIMINO SPECIAL TO BANKER & TRADESMAN

T

he Massachusetts economy and population both continue to grow, but our underperforming transportation system is a major risk to our economic future. Today, the worst rush-hour congestion in the nation is located on the highways of the metropolitan Boston region. To fix this, we need a high-quality, appropriately priced, modern approach to commuter rail service.

This will require a new service model called “regional rail,” with better frequency, different vehicle types, electrification and new investment. Massachusetts needs to move thoughtfully and with some urgency towards an updated rail plan that incorporates this model.

The heavy congestion on our roads is partially the result of an unreliable, inconvenient and expensive commuter rail system. We need to put together the right incentives and service options that make mass transit the best option for commuters. As elected officials, the business community and the general public work together on the future transportation needs of Massachusetts, a regional transit service is needed to better serve Greater Boston and finally reach Central and Western Massachusetts. This must be a priority to any comprehensive transportation finance plan.

Better Trains Will Boost Ridership

The Massachusetts Department of Transportation completed two statewide studies that guide our current and long-term transportation goals. A consistent theme in both reports is the need for a high-quality, regional commuter rail system. Both the “Future of Transportation Commission” and “Congestion in the Commonwealth” reports call for reinventing the commuter rail to “see the benefits that transit can provide for GHG reduction, congestion relief, economic growth and community revitalization,” as the former put it.

Fortunately, Massachusetts can utilize of our existing and extensive network of tracks and rail lines – we have an astounding 388 miles of track right-of-way to utilize.

If we commit to modern, electric vehicles and structural changes to our station platforms, we can create a regional rail system that offers faster, more frequent service to Boston, every fifteen or twenty minutes, throughout the day.

The newer models of trains are self-propelled, electric systems that look more like an oversized MBTA Green Line vehicle than the classic steam locomotive.

Recent cost estimates of a fully electrified commuter rail grid with the new, modern vehicles could cost up to $20 billion.

These trainsets can accelerate and brake faster than the larger locomotive-pull trainsets, while producing far fewer harmful emissions. These new vehicles can offer more frequent service and reduced travel times that are consistent with a 21st century rail system.

Massachusetts is scheduled to complete a commuter rail vision study this year, but we already know the potential of electrified regional rail. As the MBTA’s preliminary analysis shows, an electrified, frequent, bi-directional allday service would increase ridership by 35 percent (about 52,000 more daily boardings) with the current fare structure. If we commit to a more rational and accessible fare structure, it is likely we can expand ridership further.

This system is necessary if we are to meet many of the recommendations of the Future of Transportation Commission.

Based on our carbon emission goals, and electrified commuter rail system may not be a choice, but a requirement.

Recent cost estimates of a fully electrified commuter rail grid with the new, modern vehicles could cost up to $20 billion. While this is certainly a massive effort, this level of investment is already happening in other urban areas in the US and Canada.

The Seattle area approved a $54 billion plan to improve their transit options over the next 25 years. Los Angeles will expand their rail system through a $120 billion initiative over the next 40 years. Toronto’s approach may be the best model for Massachusetts. Their effort to modernize, expand and electrify their rail service will cost $16 billion, but it will generate an estimated $42 billion in economic benefits.

Massachusetts will also need a new service partnership to operate regional rail service. The MBTA’s existing commuter rail contract with Keolis expires in June 2022, and through this next procurement, the MBTA should take steps forward towards frequent rail service.

By carefully designing this next procurement, we can design new ways to use commuter rail to improve transportation options in our areas of need. Pilot programs that test different schedules, frequency, and fares on different commuter rail lines should be the first step, particularly on the Framingham/Worcester rail line as mitigation to the roadway construction on Interstate 90. New approaches to economically disadvantaged communities, such as areas of Lynn or along the Fairmount line should also be tested.

Finally, transportation investments cannot just be limited to the Boston area. We must expand transit service to parts of the commonwealth that are underserved. The economies of Springfield, the South Coast, and areas west of Worcester require viable transit options to connect with the job centers in the Boston area. By improving the transit connections to our Gateway Cities and regional urban centers we can both relieve traffic pressure and assist the economies of these other historic urban communities.

By 2040, Massachusetts’s population is expected to increase by 600,000 people. We cannot expect job growth to continue without major investments in new transportation infrastructure. Regional Rail is the alternative vision that brings the best hope for Massachusetts, so let’s take the steps necessary to make these improvements a reality and start to benefit from this service within the next 10 years.

Rick Dimino is CEO of A Better City.

6 | BANKER & TRADESMAN

OCTOBER 7, 2019

BY THE NUMBERS COUNTY CLOSE-UP

BARNSTABLE

SPOTLIGHT Wellfleet

YEAR SETTLED 1650

Wellfleet was one of the first Cape Cod towns “saved” by tourism after the local fishing and whaleling industries collapsed in the mid-1800s. In 1902, the 62-room Chequesset Inn was built on a pier off Mayo Beach, kicking off more than a century of touristfocused growth.

YEAR INCORPORATED 1651 (as part of Eastham) 1763 (as Wellfleet) TOTAL AREA 35.4 square miles POPULATION 2,750 DENSITY 139 people per square mile TAX RATES Residential: Commercial:

STATISTICAL SNAPSHOT MEDIAN SALES PRICE

SALES VOLUME

Jan.-Aug. 2019

Change from 2018

Barnstable

$510,000

12.46%

77

37.50%

Bourne

$369,450

-2.46%

194

-1.02%

Brewster

$485,000

7.18%

105

-21.05%

Centerville

$375,000

4.17%

157

4.67%

Chatham

$768,000

21.9%

109

-11.38%

Cotuit

$449,500

2.16%

60

42.86%

450000 $450,000

Dennis

$397,000

7.88%

248

3.33%

$400,000 400000

Eastham

$435,000

-7.45%

97

19.75%

$350,000 350000

Falmouth

$432,500

2.98%

427

8.38%

$300,000 300000

Harwich

$441,250

3.82%

194

2.11%

$250,000 250000

Hyannis

$310,000

-2.82%

147

-7.55%

Community

Jan.-Aug. Change from 2019 2018

Marstons Mills

$384,000

14.63%

89

9.88%

Mashpee

$417,500

-0.6%

196

-10.91%

Orleans

$596,000

0.25%

63

-4.55%

TOTAL NUMBER OF HOUSING UNITS 4,613

“Every day sees humanity more victorious in the struggle with space and time.”

— Guglielmo Marconi, inventor of the wireless telegraph and Wellfleet resident during his famous 1903 experiment

MEDIAN SALES PRICES

2010 ’10

2011 ’11

2012 ’12

2013 ’13

2014 ’14

$551,500

-4.09%

63

-3.08%

Provincetown

$837,500

-19.53%

18

80%

Rank

Lender

% of Market Share

1

2800

2

Quicken Loan Inc.

3

United Shore Financial 3.49% Services LLC

2,800

2100

0.74%

Truro

$665,000

8.13%

33

22.22%

1,400

Wellfleet

$549,000

-0.9%

37

-17.78%

700 700

Yarmouth

$337,500

2.27%

341

-8.82%

• Statistics based on single-family home sales of $1,000 and above, excluding condominiums and foreclosure deeds • Source: The Warren Group

TOP 3 MORTGAGE LENDERS Cape Cod Five Cents 14.36% Savings Bank

271

0.17%

2019 ’19

Barnstable Massachusetts

3500

1.95%

2,926

2018 ’18

3,500

$392,500

3.43%

2017 ’17

• Source: The Warren Group

Sandwich

$409,602

2016 ’16

• Graph based on single-family home sales of $1,000 and above, excluding condominiums and foreclosure deeds

2,100

Barnstable County

2015 ’15

• All sales thru August YTD

SALE VOLUME

Osterville

$7.73 $7.40

Rankings and Mortgage Market Share stats include purchase and refinance mortgages for single-family homes through June 2019 Market share percentage based on volume of mortgages • Source: The Warren Group

1400

0

0

5.66%

TOP 3 LOAN ORIGINATORS Rank

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 ’10

’11

’12

’13

’14

’15

’16

’17

’18

’19

• All sales thru August YTD

• Graph based on single-family home sales of $1,000 and above, excluding condominiums and foreclosure deeds • Source: The Warren Group

Lender

Organization

1

Patricia Lotane

Cape Cod Five Cents Savings Bank

2

Daniel J. Pulit

Cape Cod Five Cents Savings Bank

3

Meryl L. Watson

Cape Cod Five Cents Savings Bank

Ranked by volume of loans through June 2019 • Source: The Warren Group

TOP 10 EXISTING HOME SALES Street Address Community

Buyer Seller

Date Price

1

968 Main St. Cotuit

Ocean View RT Kevin Starr

8/27/2019 $8,000,000

2

461 Main St. Osterville

Geoffrey A. Ballotti Edward L. Breslow

3

995 Sea View Ave. Osterville

4 5

Rank

Street Address Community

Buyer Seller

Date Price

6

295 Wianno Ave. Osterville

Ralph P. Fargnoli Jr T Sheila A. Perry

6/7/2019 $3,600,000

6/14/2019 $8,000,000

7

3 Lincoln Ave. Harwich

Brian Dolan RET Robert P. Badavas

8/27/2019 $3,600,000

William J. Allard Far Niente IRT

8/27/2019 $7,650,000

8

17 Windmill Lane Yarmouth

Peyton Evans RET David Fyfe

8/2/2019 $2,900,000

56 Rendezvous Lane Barnstable

John P. Glowik Jr. Edward F. Degraan

6/14/2019 $5,650,000

9

60 Robbins Way Chatham

Yuji Sugimoto Denise A. Powers

7/10/2019 $2,899,000

31 Mill Road Harwich

Robert P. Badavas Senior Moment RT

8/29/2019 $4,200,000

10

29 Shoestring Bay Road Mashpee

Gregg S. Ribatt 29 Shoestring NT

6/21/2019 $2,895,000

• Statistics from June 2019 - August 2019 • New Construction Excluded • Source: The Warren Group

Rank

OCTOBER 7, 2019

BANKER & TRADESMAN | 7

COMMERCIAL REAL ESTATE C H A L L E N G I N G C L I M AT E

To Keep Rising Waters at Bay, Developers Play Defense

NEIGHBORHOODS IMPACTED BY OVERLAY

Climate Change-Driven Flooding Spurs Cities to Plan New Zoning BANKER & TRADESMAN STAFF

W

ith the risk of catastrophic floods hitting Greater Boston in next 50 years increasing thanks to climate change-driven sea level rise and more intense storms, some area developers have already begun to design their buildings to deal with the threat.

But given the scale of the threat and new requirements officials in Boston and Cambridge are expected to issue in 2020, every developer working in some of the most valuable parts of either city will soon have to take climate change into account.

Many are taking small steps, like locating utilities higher up in new buildings, but projects face both financial and design challenges in trying to adapt to rising seas and more fearsome weather.

“I sat through focus groups and other things relative to the new [BPDA coastal flooding design] guidelines,” said Nicholas Iselin, general manager of development at LendLease. “They’re really difficult problems.”

Defense in Depth

LendLease’s luxury residential Clippership Wharf project, which recently opened on the East Boston waterfront, is a showcase for how waterfront developments may have to pay for their prime locations in the future.

The site is armored against coastal flooding and sea level rise using a mix of techniques. In some places, jumbles of granite blocks fortify the border with the water. In others, a series of salt marsh terraces built behind the line of the historic seawalls form a “living shoreline” that adds beauty but also helps soften the blows of storm-driven waves.

If water gets past the property’s edge, a defense in depth awaits it. The harborwalk that rings the site has picnic lawns, berms and low seating walls that create successive barriers to flooding. First-floor retail and restau-

rant spaces and garage entrances are fitted to take barriers Iselin said “take a couple of guys an hour to erect.”

Like a castle keep, the project’s main buildings and central courtyard sit a full 14 feet above the current high tide line.

“We wanted to create something that looked different and felt different,” Iselin said. “We had this aspiration for this to be a 100-year project when we started out. How far can we push when we know what our future is with sea level rise?”

Like a castle keep, the project’s main buildings and central courtyard sit a full 14 feet above the current high tide line.

Absorption has been swift in both the apartment and condominium portions of the project. The half the 80-unit Slip65 building was sold out in just two days, with sales in its 114-unit companion building similarly speedy. And nearly half the 284 apartments in the remaining buildings on site are already leased.

Boston to Launch New Regs

While design on Clippership Wharf began before the Climate Ready Boston initiative set in motion the city’s preparedness efforts, future projects along Boston’s waterfront like Accordia Partners’ redevelopment of the Bayside Expo Center will have to contend with a new coastal flooding zoning overlay being developed by the BPDA alongside those inland in the South End, Charlestown’s Rutherford Avenue and the Newmarket industrial zone.

The overlay will cover every parcel with a projected 1 percent annual chance of flooding in 2070, assuming sea levels rise by 40 inches.

Image courtesy of the city of Boston

BY JAMES SANNA

The Boston Planning & Development Agency plans to roll out a new coastal flood zoning overlay that will cover every parcel with a projected 1 percent annual chance of flooding in 2070.

The new regulations won’t be presented to the city Zoning Commission for another six to eight months, but on Sept. 12 city officials published a set of design guidelines for projects in the affected area.

The guidelines offer a menu of options for developers, owners of existing commercial and residential buildings and homeowners, grading the options by cost, ease and speed of implementation. The city has also recently added a coastal flooding overlay to its online zoning viewer to allow property owners to gauge their exposure to coastal flood risk.

The guidelines also encourage owners of existing buildings in at-risk areas to raise the lowest interior floor or relocate its uses entirely to

additions on top of the building. However, a city spokesperson confirmed the zoning overlay is not currently expected to add density or height bonuses to accommodate this in specific neighborhoods, but such changes might be made later.

Life Science Under Water?

The threat from flooding also hangs over one of the next big frontiers for life science real estate: The Alewife “Quad.”

Developers are eyeing the industrial area bordered by Fresh Pond Parkway, Concord Avenue and developments along Cambridgepark Drive, inspired by Bulfinch Cos. and The Davis Cos.’ nearby successes.

Continued on Page 10

HOT PROPERTY WHAT: DYER BROWN OFFICES

Each week, Banker & Tradesman commercial real estate reporter Steve Adams spotlights a commercial real estate property in Massachusetts notable for its high deal activity, unique design or one-of-a-kind special features.

WHERE: ONE WINTHROP SQUARE, BOSTON OWNER: MM REAL ESTATE LLC BUILT: 1899

THEY SAID IT:

“At Dyer Brown, we believe culture must drive design. Our most successful projects start with full engagement with the client company’s staff and leadership, uncovering essential insights into their company culture and workflow.

We recognized that we had to take the same approach for our own office redesign to be a success.”

• Boston-based architect Dyer Brown recently completed renovation and expansion of its Financial District offices, as it marks this year’s 50th anniversary of the firm’s founding.

• The project’s lead designers surveyed staff and noted employees’ preferences for comfortable and “cozy” spaces that foster creativity and spontaneous conversations.

• Mezzanine work stations with sit-to-stand desks are illuminated by overhead fixtures constructed from noise-attenuating materials.

The reception area is designed as a cafe with still and sparkling water on tap, counter seating and pendant lighting.

• The hospitality-inspired redesign added four meeting spaces, a shower room, mother’s room and a “wellness room” for reflection, meditation and catnaps.

— Brent Zeigler, president and director of design, Dyer Brown

THINK YOUR PROPERTY IS HOT? Drop Steve a line at sadams@thewarrengroup.com

8 | BANKER & TRADESMAN

OCTOBER 7, 2019

IN PERSON

Rebuilding the Old, Building the New Q: How did you get into this line of work?

A:

I grew up watching my father design and draft buildings, and I loved exploring local construction sites to see how buildings went together. After earning a bachelor’s degree in architecture, I was immediately attracted to a more “hands-on” side of the building industry. After a brief stint in wood and metal framing, I committed to working as a cabinetmaker for several years. I then branched into other finishing trades including interior trim/woodwork, flooring and finished concrete.

All of these experiences gave me great background experience as I moved into the field of architecture. I still love working with my hands and stay connected by renovating my historic home on the South Shore.

Q: Your firm started with mostly design residential work, but now is getting into mixed-use and restoration work. Why did you make this move?

A:

Going back to my days as a student, I have always had a great interest in both areas, so it was exciting to see some opportunities of this nature come along after I joined Axiom. I had gained a solid amount of experience in managing larger projects in my previous firm, so that helped us to transition into accepting some of these larger contracts for mixed-use buildings in our local area.

As for the historic restoration/adaptation work, Axiom has gained quite a lot of experience through the years working on older homes, so this was a natural transition for us.

Both of these avenues have allowed our company to stay active and relevant in a residential design market that has become very saturated and competitive.

Q: What are the challenges with doing restoration work instead of just tearing down a home and building new?

A:

Massachusetts is home to many privately owned historic buildings that are not subjected to strict local restrictions limiting what can be changed or removed. We hate seeing any historic buildings taken down, but unfortunately that is a reality today in an industry where often the cost to restore and remodel an older building far outweighs the cost of a new building. Accessibility requirements have certainly contributed to that elevated cost, and so our firm has become well versed in retrofitting historic buildings for accessibility.

The public view is often quite different from the view of a building owner who is faced with the reality of making the costs work. For this reason, restoration work often requires additional funding from state or local sources that can help to offset the added cost. We will always encourage owners to make every effort to keep buildings that offer historical significance, but we are also realistic with our clients about cost and value.

JAMIE KELLIHER Title: Principal, Axiom Architects

Q: Why is mixed-use so important right now and how can it help communities with high rent and other housing issues?

A:

Industry experience: 10 years

BY BRAM BERKOWITZ SPECIAL TO BANKER & TRADESMAN

U

nlike many architects, Jamie Kelliher started his career in the building trades, first as a framer and a cabinetmaker before branching into other finishing trades.

Kelliher is the second person in his family to help lead Hanover-based Axiom Architects, a firm his father James Kelliher founded over 40 years ago.

His own career started with an internship for the visionary architect Paolo Soleri in Arizona, but eight years ago he traded sunny desert skies for the Bay State when he took a job at a mid-sized firm in the Springfield area.

Towns have begun to encourage small- and mediumsized mixed-use projects as a way to build walkable communities. Our firm is working hard to show that the architectural design of [mixed-use buildings] can be easily adapted to fit the smaller scale, more traditional aesthetic of these towns.

In recent years the need for new housing in many Massachusetts communities has been widely discussed at the state level. Mixed-use development, which typically incorporates first-level commercial space with apartments or housing on the upper levels, is an alternative opportunity to provide the needed housing in zones that may have previously only included ground-floor commercial activities. There are abundant opportunities for redeveloping failing suburban strip-mall-style properties to include residential uses in a creative way that could potentially result in a more pleasant, walkable community environment. This approach could also, over time, help to preserve residentially zoned areas from being subjected to larger multi-story housing complexes that residents often strongly oppose.

Q: Is there anything in the future you hope to incorporate in your mixeduse projects?

A:

We are seeing more and more requests to explore mixed-use design projects in smaller suburban towns, especially in our local South Shore area. Towns have begun to encourage small- and medium-sized mixed-use projects as a way to improve village districts or existing commercial areas, and to start to build walkable communities. Many of the districts that allow this type of development are close to commuter rail transportation, eliminating the requirement of owning a car.

Our firm is working hard to show that the architectural design of this relatively new suburban building typology can be easily adapted to fit the smaller scale, more traditional aesthetic of these towns. We are looking to break away from the form of a typical “urban style” mixed-use building and seamlessly integrate our projects into their unique and often historically rooted environments.

KELLIHER’S FIVE FAVORITE THINGS:

1

Any design by Carlo Scarpa

2

Mid-century furniture

3

Making things with wood

4

Vintage 1980s Skateboards

5

Traveling in Europe

OCTOBER 7, 2019

BANKER & TRADESMAN | 9

BANKING & LENDING BEACON HILL

Industry, Advocates Want Rules of the Road Continued from Page 1 Consumers will have the right to ask what data has been collected, request that their data be deleted and opt out of having data disclosed to third parties. If consumers think a company has violated their rights under the law, even if no losses were suffered, they will have a “right of action.” Lawsuits could result in the consumer receiving compensation, the greater of $750 or the amount of actual damages.

Consumer Choice a Key Principal

Creem’s own experience as a consumer helped motivate her to file the bill. She said consumers should have a choice about how companies use their data.

“The companies that we rely on are tracking our every move, and they want to learn about us and then sell that information without our permission,” Creem said. “I ought to be able to have a say in how that information is used or opt out of the system completely.”

The proposed legislation would apply to companies with revenue of $10 million or more. This is different from the California law, which set the revenue threshold at $25 million.

Creem said she would prefer to see all organizations adhere to the law, regardless of size, but added that threshold could change as testimony is heard and the bill moves through committee.

The bill covers the collection of biometric data, including fingerprints, voice recordings, and facial recognition data used in security measures.

Creem’s bill exempts data collected through federal statutes, including the Gramm-LeachBliley Act, which regulates financial services firms. Massachusetts Bankers Association Executive Vice President Jon Skarin said the organization was pleased to see this provision in the bill but has decided not to take a formal position on S.120.

Skarin said the MBA would prefer a national standard over individual state laws, adding that he does not expect Congress to pass anything in the near future.

During an appearance at Boston FinTech Week in September, Rep. Trey Hollingsworth (R-Indiana), a member of the House Committee on Financial Services, described ongoing discussions about federal data privacy legislation as being only in their early stages.

The MBA has two key concerns about all consumer data privacy legislation, Skarin said.

One is to make sure the language in the bill is not too specific when referring to the everchanging world of technology.

“They should make it as flexible as possible about what information is allowed to be shared and what’s not,” Skarin said. “If they don’t, they will be in situation where they have to keep coming back and making changes to the law.”

Skarin also noted that banks often end up dealing with data security breaches even when a merchant or other entity is responsible. He would like to see legislation that requires the entity responsible for violations to bear cost burdens.

Skarin said the MBA would prefer a national standard over individual state laws, adding that he does not expect Congress to pass anything in the near future.

Without national laws governing how companies, including banks, use consumer data state legislatures like Massachusetts’ are stepping into the breach to satisfy voters’ demands for regulation.

Melanie Conroy, an attorney at Pierce Atwood LLP in Boston and an expert on data privacy, said most data privacy legislation is supported by both businesses that would be regulated and consumer advocates.

“You have actually seen a great deal of advocacy for comprehensive consumer protection to be enacted on behalf of the business community,” Conroy said. “I think that it strongly demonstrates the need for certainty and clarity in this space and also for a very careful legislative process.”

Conroy, whose clients include financial institutions, said that internet-based services and products, as well as multi-state relationships, create complexities that aren’t easily solved.

“The concern here is the lack of clarity or potential haste in finalizing or implementing these laws could create significant business risk,” Conroy said. “You want to ensure that what is enacted is thoughtfully done with ap-

propriate input from the affected entities to ensure that there aren’t unintended consequences that result.”

More clarity is needed around the GrammLeach-Bliley Act exemption, Conroy said, and how it affects financial institutions collecting data through fintech services not covered by the act. She said California is currently dealing with this issue, as well.

Despite the questions and concerns raised by potential privacy laws, Conroy does see demand for data privacy legislation .

“I think in light of the momentum where you have so many different groups urging legislators at federal, state and local levels – depending on who you’re talking to – urging them to adopt a comprehensive privacy law, I would be surprised if that momentum does not lead somewhere,” Conroy said. “Now, where it leads is the question.”

Email: dmclaughlin@thewarrengroup.com

GOSSIP REPORT 1

BOSTON

1,3

Address: 1 Dalton St. #4005, Boston Price: $5,250,000 Buyer: 4005 Ziggy LLC Seller: 1 Dalton Owner LLC Agent: Tracy Campion, Campion & Co. Size: 2,186 square feet Sold: 9/23/2019

Spectacular beach views feature prominently in this week’s Gossip Report. Two Nantucket sales and one Cape Cod sale offer their buyers plenty of sun-drenched seascape to drink in.

2

4,5 2

HARWICH

Address: 27 Dunes Road, Harwich Price: $5,150,000 Buyer: AL NT Seller: Ellyn A Mccolgan RET Agent: Sandra Tanco, Kinlin Grover Size: 4,947 square feet on 0.76 acres Sold: 9/19/2019

3

BOSTON

Address: 300 Pier 4 Blvd. #7G, Boston Price: $4,917,000 Buyer: Theresa Khanna and Rohit Khanna Seller: Pier 4 Residences LLC Agent: Janice Dumont, Advisors Living Size: 2,261 square feet Sold: 9/23/2019

4

NANTUCKET

Address: 32 Jefferson Ave., Nantucket Price: $4,500,000 Buyer: Eleven Lincoln Avenue T Seller: 12 Jefferson Avenue RT Agent: Bill Liddle, Great Point Properties Size: 9,060 Sold: 9/18/2019

5

NANTUCKET

Address: 245 Hummock Pond Road, Nantucket Price: $4,350,000 Buyer: Maverick T Seller: Annette Brown and Theodor H. Brown Agent: Maury People Sotheby’s International Realty Size: 3,001 square feet on 0.57 acres Sold: 9/20/2019

10 | BANKER & TRADESMAN

OCTOBER 7, 2019

W

eWork’s new leaders shelved plans to enter the stock market last week as they sought to repair the battered image of a company that appeared to revolutionize the office-rental industry and was poised just weeks ago to go public with a valuation of nearly $50 billion.

The decision came less than a week after co-founder Adam Neumman stepped aside as CEO. His corporate governance practices had raised conflict-of-interest questions that compounded skepticism about the money-losing company’s prospects for turning a profit.

The suspended IPO raised an immediate funding challenge for WeWork, which had counted on a successful stock offering to pursue the meteoric growth strategy that made it so attractive to private investors in the first place. The company, which began as a coworking space in Manhattan in 2010, had planned to expand in many of the 111 cities where it now operates and launch in up to 169 additional cities across the world.

The latest WeWork deal this summer expanded its local footprint to approximately 1.6 million square feet and recently signed a lease for another 87,000 square feet in Back Bay. However, the size of its local footprint has raised concerns about how it might impact the city office market in any eventual recession.

WeWork’s new co-CEOs, Artie Minson and Sebastian Gunningham, said the company was suspending its IPO to “focus on our core business, the fundamentals of which remain strong.”

The company gave no further details, but its core business involves leasing buildings and dividing them into office space that it rents out to members, many of them startups, freelancers and small business owners who cannot afford permanent office space.

Larger corporations are also a growing part of the company’s customer base because

it offers a cost-efficient way to expand to new markets or recruit workers from a wider selection of cities without having to build new offices.

But WeWork’s grandiose vision failed to resonate on Wall Street after the company revealed massive losses in its IPO filings. Initially valued at $47 billion, WeWork was considering an IPO priced at well below $20 billion before pulling out.

For now, WeWork has cash. It was sitting on $2.5 billion at the end of June.

But it continues to burn more cash running its day-to-day business than it brings in.

During the first six months of the year, WeWork went through $198.7 billion to fund its operations, meaning it spent more on rent, taxes, maintenance and other operating expenses than it brought in. That figure does not include the cash that it spent on buying equipment, paying security deposits for new locations or other financing or investing activities.

Some cash is coming in the next year, with $1.5 billion arriving from its biggest investor, the Japanese firm SoftBank, in April as part of a deal struck at the start of this year. But even with that infusion, uncertainty remains about whether WeWork can raise enough cash to support its aggressive growth. Two weeks ago, S&P Global Ratings cut WeWork’s credit rating to “junk” status.

WeWork is burning through a total of about $2.8 billion each year, according to estimates by Sanford C. Bernstein analysts. If it continues at that estimated pace, it may not have enough cash to make it to June.

Bernstein estimates that WeWork needs at least $6 billion in funding and possibly up to $8 billion if a recession were to hit in the next three years. If it had raised at least $3 billion from the offering, it would have gotten access to $6 billion in financing that was contingent on the deal.

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Photo courtesy of LendLease

WeWork Shelves IPO, May Need $6B in Funding Over Three Years

LendLease used a series of landscape architecture elements and 14 feet of fill to protect its new luxury residential project Clippership Wharf from future storms.

Market Hasn’t Caught Up to Climate Change Continued from Page 7 However, the area faces a flood risk by 2030 in the event of an especially severe rainstorm, and a serious nor’easter or hurricane could overwhelm the Somerville dam that protects the area by 2070. Like Boston, Cambridge has also rolled out an online tool that property owners can use to determine their exposure.

Like Clippership Wharf, the buildings in Bulfinch’s just-completed Cambridge Discovery Park are elevated above the 2070 flood projections and use defenses engineered into their surrounding open space to keep the water at bay. Thanks to skillful landscape architecture, company President Robert Schlager said, those defenses are also amenities where tenants can take a stroll or simply enjoy from their office windows.

“Because of experience [and long-term ownership strategy], we try to predict the future as far ahead as we can,” he said. “In a car, the speedometer goes up to 100 mph, but how often do you go that fast? Not often, but you want to be able to do that if you need to.”

City planners are hoping to put some of the same techniques to work elsewhere, said Cambridge Assistant City Manager for Development Iram Farooq. New citywide resiliency zoning expected next year may require new projects to be elevated above the flood line. A second sidewalk or terrace in front of groundfloor retail uses, set higher up than the main sidewalk, could help preserve street-level vibrance, she said.

Money a Key Obstacle

Climate change resilience features are seen as a valuable addition to projects, said ULI New England Director of Policy and Outreach Manikka Bowman, but not every commercial developer, source of financing or insurance provider sees them as necessary right now.

“Unless you’re talking about more longterm asset holders, the insurance market is responding to the marketplace,” she said. “There are some necessary conversations that need

to take place that can get people to think beyond the three-year or the five-year window of bringing a product to market.”

Absent government requirements, cost is the primary obstacle.

“There are clearly tradeoffs – this stuff is expensive,” said Jeff Malloy, who leads the climate change adaptation practice at the Boston-based planning firm BSC Group. “At this point with [many adaptations] it’s a hedge. It’s hard to spend more money if you don’t have to.”

Despite hard financial realities, Farooq said, few developers have pushed back against her staff ’s encouragement to design climate change resilience into recent projects, even on expensive asks like raising a building’s ground floor level.

“Partly it’s enlightened self-interest because the impacts are close enough – if you look at 2030 there are impacts,” she said. “Which is not to say developers don’t complain about anything that costs extra, because the bottom line is very important, but it’s been very heartening to see that it hasn’t been a big fight in any of these instances.”

For now, Boston’s new zoning overlay offers a good tool to help waterfront developers work together to build the city’s first line of defense, Clippership Wharf ’s Iselin said.

The city is also developing long-term plans for seawalls and other infrastructure that can keep out storm surges starting with a rebuilt Moakley Park in South Boston. Boston Mayor Marty Walsh budgeted $2 million towards design and pre-construction for the project in the city’s fiscal year 2020 budget.

Still, government mandates may be the only way to protect urban areas and knit different municipalities together to close gaps in the region’s defenses, Bowman said.

“When the waters rise, they’re not going to say, ‘This is Quincy, so I’m not going to go there,’” she said.

Email: jsanna@thewarrengroup.com

Expect a Slow Deflation, Not Collapse in Luxury Market

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Continued from Page 3 “Affordability issues, trade tensions and diminishing foreign demand have capped price growth in San Francisco and Los Angeles for now,” UBS notes in its bubble report. “Weakening support from the financial industry and an unfavorable tax treatment have led valuations to decline in New York.”

Yet, I wouldn’t be too sanguine here.

Prices in New York, San Francisco and Los Angeles only started to flatten out when they had reached such loony levels that it started to kill demand.

With construction of new homes and condos still not enough to keep up with demand, there is nothing to stop this pattern from repeating itself in Greater Boston, which is already pretty expensive.

UBS has our market pegged at “fairly valued,” which would probably be news to any

number of frustrated condo or home buyers in Boston and in the suburbs.

Dotted with new towers like the 60-story One Dalton, Boston may look like a luxury wonderland, but all that glitters isn’t necessarily golden.

After all, it’s an open question how many condos in these new buildings are sitting empty after being snapped up by investors and flippers looking for a quick buck.

Even so, it seems unlikely we will see a bubble-like price implosion, but rather a slow but chronic leak.

Eventually, it will be Greater Boston’s turn to pay the piper. But until then, prices are only going to get crazier before they go lower again.

Scott Van Voorhis is Banker & Tradesman’s columnist; opinions expressed are his own. He may be reached at sbvanvoorhis@hotmail.com.

OCTOBER 7, 2019

BANKER & TRADESMAN | 11

CLASSIFIEDS SECTION

THE ONE PLACE TO FIND OPPORTUNITIES

Classified Ads can also be accessed online. Visit bankerandtradesman.com and click on The Marketplace.

RESIDENTIAL REAL ESTATE

COMMERCIAL REAL ESTATE

AUCTION

EDUCATION

PROFESSIONAL SERVICES

HELP WANTED

To Place an Ad in Classifieds, Please Contact Steve Ketler at 617-896-5307.

AUCTION

V I S I T C L A S S I F I E D S. B A N K E R A N D T R A D E S M A N. C O M

12 | BANKER & TRADESMAN

OCTOBER 7, 2019

CLASSIFIEDS SECTION

THE ONE PLACE TO FIND OPPORTUNITIES

Classified Ads can also be accessed online. Visit bankerandtradesman.com and click on The Marketplace.

RESIDENTIAL REAL ESTATE

COMMERCIAL REAL ESTATE

AUCTION

EDUCATION

PROFESSIONAL SERVICES

HELP WANTED

To Place an Ad in Classifieds, Please Contact Steve Ketler at 617-896-5307.

AUCTION

R E A L E S TAT E

Real Estate AUCTION

For Sale

1.9± Acre Redevelopment Site on Rt. 3 Lockwood St

Cowesett Ave

3

272 Cowesett Ave., W. Warwick, RI

17,234± sf. Restaurant/Banquet Facility Formerly Known As “The Villa”

Thursday, October 24 at 11am Preview: Thursday, October 17 (11am-1pm)

Info, Full Terms, Broker Reg., and More at:

www.JJManning.com (800) 521-0111

94 Union St., Marshfield, MA 02050

Excellent Opportunity to bring this antique colonial home back to its former glory.

Situated on 1 acre of land and containing approximately 2,800 SF of living area, this home has new windows and has been gutted and partially reframed, partially wired and partially rough plumbed. An oversized 2 car garage is situated adjacent to the house. This property is conveniently located to Route 3 and all major local roads.

Purchase Money Financing available to qualified buyers.

List Price: $ 459,900 Michael L. Katzeff, Listing Broker 617-965-0550 MLS No. 72560572

RI Lic #RES.0026070 • Ref 19-1847

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