Tuesday, April 11, 2006

N.Y. realty trust wins bidding for Filene's site

Thomas C. Palmer Jr.
The Boston Globe

BOSTON--Federated Department Stores Inc. has chosen Vornado Realty of New York to be the new owner and developer of the Downtown Crossing block occupied by the historic Filene's building, Mayor Thomas M. Menino said yesterday.

Menino yesterday issued a statement hailing the transaction, which involves "a significant location in the city," and lauding the company, a real estate giant that owns the Boston Design Center.

"It's a developer that is well-respected and understands the community and neighborhood process," Menino said, "and particularly the challenge of doing a complex development such as this."

A Federated spokesman had no comment yesterday, and Vornado's policy is not to speak to the news media. But representatives of both companies were scheduled to meet with officials of the Boston Landmarks Commission this morning, a City Hall official said.

Since Filene's was put on the market last year by Federated, which merged with the former owner of Filene's, May Department Stores Co., the commission has been considering landmark status for the block along Washington Street between Summer and Franklin streets, occupied by four buildings of various ages.

An executive from another team of New York-based bidders for the Filene's building confirmed yesterday that it is out of the running. The executive said Federated has told his development team, lead by businessman and investor Alex Adjmi, that it has a deal or is near one with another developer.

The executive asked not to be identified because there could be an opportunity to bid again if a deal between Federated and Vornado is not made final.

Filene's will vacate the building soon, when that brand is phased out. Federated will continue to operate the Macy's store across Summer Street. Macy's occupies the old Jordan Marsh building.

The Filene's building is partially occupied and is expected to continue to house Filene's Basement, which is owned by a separate company. Filene's Basement has a long lease.

Neither Federated nor Vornado has said anything publicly, but others in the real estate industry who have watched the marketing of the full-block complex of buildings said late last week that it appeared a deal had been struck.

The sale price is expected to be about $90 million, according to the executive. The Adjmi team initially bid more, but reduced its offer after weeks of investigation into the condition of the site, as well as exploring what the property could be redeveloped as.

Some developers have envisioned a hotel or condominiums in a tower, perhaps 35 floors high, with a retail store such as Target on the renovated floors of the historic Filene's building, which dates from 1912 and is listed on the National Register of Historic Places.

The Filene's complex has four buildings, including the historic Summer Street structure designed by the well-known Chicago architect Daniel Burnham, and three others of lesser importance. But landmark status for the entire block could complicate the redevelopment, including construction of a tower.

Filene's Basement also must be accommodated, during construction and in the long run.

And environmental conditions in the buildings and uncertainty about how much height City Hall will allow on the block complicate the picture -- making it difficult to determine a fair price for it.

Vornado, a publicly owned real estate investment trust, owns or manages, sometimes in partnerships, more than 100 million square feet of property, including 21 buildings in New York City. It owns Merchandise Mart and Apparel Center in Chicago and last year purchased the Design Center in Boston for about $96 million. It also owns Charles E. Smith Commercial Realty LP in the Washington, D.C., area.

Vornado, a retail company that in 1981 became a real estate business, is traded on the New York Stock Exchange.

In February, Adjmi had said that he and his partners hoped to wrap up a deal for the building quickly. But, according to the executive involved in that negotiation, City Hall officials were angered that news of that deal appeared in the press before the Adjmi team had officially informed them that it wanted the building.

The executive said a member of the Adjmi team -- though not Adjmi himself -- had met with Boston Redevelopment Authority officials last fall.

Last month, Menino said the prospective deal between Federated and the Adjmi team was dead.

Boston developer John B. Hynes III, who had initial discussions with the Adjmi team about joining forces, said last week that he would be interested in working with Vornado, as well. Hynes said he had not discussed such a partnership, though he considered Vornado capable of pulling off a complex project.

Hynes could not be reached for comment yesterday. Asked about Vornado last week, he said, "They're a very capable group."

The Adjmi team included partners Robert Cayre and Isaac Gabbay. The same individuals were involved in the purchase of One Faneuil Hall Square, the former Abercrombie & Fitch building, last year, the executive said.

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