The developers of the Chain Forge hotel project in the Navy Yard have always had a complicated financing plan for redevelopment of the old Naval chain factory, but with COVID-19 hitting the markets, it has become much more complicated – and now the developers are asking to pay $1.22 million in fees to be allowed to continue putting financing in place through August.
“The impacts of the Covid-19 pandemic are far reaching and dramatic,” read a memo from the Boston Planning and Development Agency prepared for its virtual Board meeting on April 16. “Millions of U.S. residents have been ordered to remain in their homes nationally and unemployment claims have reached unprecedented levels. The capital markets are in great flux and the hotel industry has been seriously impacted. Equity investors and lenders, uncertain of the new underwriting models, are cautiously refraining from new hotel loans for the time being.”
The project has been suffering from numerous delays for several years, and developers began paying $250,000 fees to the BPDA last year, with one term being $375,000. Now, they have agreed to pay $1.22 million in total fees to the BPDA in order to keep the project going, all of which will be added up in the final ground lease. They would now have until Aug. 31 to wrap up construction funding and pull a building permit, with the failure to do so resulting in a renegotiation of the terms of their lease.
The developers told the Patriot Bridge earlier this year that they were close to getting things sealed up and hoped to begin construction in April or May. That has taken a sideways turn with the COVID-19 outbreak and the delicate nature of their funding “stack.”
One delay that went on for some time revolved around negotiations with the National Park Service to require the developers to commit a certain portion of profits from the hotel towards upkeep of the National Park in the Navy Yard. After that was solved, the developers began to seek new tax credits for being in an “opportunity zone.” That program was created in the federal Tax Reform Bill and was implemented late last year.
“In short, the ‘capital stack’ or financing for the rehabilitation of the Chain Forge Building will be immensely complicated,” read the BPDA memo. “However, the result will be the rehabilitation of an historic building that has been vacant for over 40 years, making historical equipment available for public view, new hotel rooms to accommodate visitors to Boston, and the successful use of a new economic development tax incentive program in Boston for the first time.”
The Board will vote on the new terms April 16 in a virtual BPDA meeting.
•The Whitaker Wind Sculpture exhibit scheduled for this May in the Navy Yard and put on by the Navy Yard Garden Association is being considered for a major extension of the exhibit.
The kinetic wind exhibit created by a very reclusive and unique artist was supposed to be installed in May with a ceremony, but that might be in flux. It was supposed to wrap up in September. However, the BPDA is asking its Board to consider extending the exhibit agreement through May 31, 2021.
•The Charlestown Marina is just about to begin work at long last on the Pier 6 project, but before that can happen, the BPDA is asking that their lease on Water Parcel D be extended at the same rent for one year, through May 1, 2021.
The parcel is under water, and was procured by the Marina when it took over for the disgraced Captains Quarters Marina in 2014. They have been paying $35,000 per year for use of the parcel since 2015, but have been tied up in major red tape from the state regarding the sins of the past owner. In that time, they have constructed a huge, new marina further up the waterfront in the Navy Yard. Pier 6 was phase 2 of that effort. Now, with COVID-19 hitting, they are asking that their rent payments for Parcel D not increase as it was supposed to do in May.
They hope to freeze the $35,000 payment for another year.
“The impacts on the tourism industry for 2020 are unknown at the time of writing of this memo, but expectations are for a dramatic decrease in vacation travel,” read the BPDA memo. “Much of the business for Charlestown Marina, LLC is seasonal and involves vacationers visiting Boston for pleasure in their recreational vessels. That business, at least for 2020, is likely to be seriously impacted.”
The Board will vote on the matter April 16.