The Chain Forge hotel project in the Navy Yard is paying handsomely to extend their development designation for the old forge building, and in a tough COVID market for hotel financing, is looking to move towards a residential development.
The Boston Planning and Development Agency (BPDA) Board approved an extension until Dec. 31 for the 230-key hotel with restaurant space, but the developer, CVPA Chain Forge, will pay more than $2.55 million to maintain their designation. At the same time, with hotel uses in complete turmoil due to COVID-19’s disruption of the travel industry, the developers and the BPDA will begin entertaining a change of use to a residential development.
“The capital markets are in great flux and the hotel industry has been seriously impacted,” read the BPDA memo. “The lending and equity markets remain overtly cautious in committing funds toward new hotel developments given the precarious status of the hotel industry and the uncertainty pertaining to the timeline and strength of the hotel Industry recovery. It remains unclear as to when the lending and equity investment industry will contemplate financing for new hotels and what, if any, extraordinary lending criteria will be invoked.
“Tenant has indicated a desire to consider a change in the development project from hotel to multi-family residential to increase the likelihood of conventional financing,” continued the memo.
That, of course, would spark a complete re-start of the process that was done in 2017 and before to review the renovation of the old building into a hotel. To change the use, the developer would have to initiate a brand new Article 80 and Zoning process with the community. Chain Forge developers told the BPDA they plan to do their due diligence in pursuing the change to residential, while also still trying to get funding in line for the hotel use.
The BPDA gave them until Dec. 31 to do that, but it cost the developer a pretty penny – once again.
Chain Forge agreed to pay the BPDA $833,333 for the extension to Dec. 31, and this builds on top of previous fines levied for numerous extensions on the designation dating back to 2018. Chain Forge was designated in December 2017.
In total, Chain Forge now owes $2.55 million in fines for getting excessive extensions on their designation. They have paid $345,000 of that fine, and another $250,000 is in an escrow account. That leaves them with a fine of $2.2 million due to the BPDA. As part of the extension to the end of 2021, they have agreed to pay $73,611 per month for 30 months to take care of the building fine. If they were to request additional time beyond Dec. 31, they would $83,333 per month for the privilege.
The project is located in the old Building 105, and high hopes were put upon the project when it came to light – as it had been a vacant building for 40 years. Most in the Navy Yard supported the concept.
However, complications with funding – particularly for a slow-moving Opportunity Zone tax credit financing vehicle approved by the federal government in 2017. There is still hope that program can be utilized with investors looking for an investment in an Opportunity Zone with terms beyond 10 years. However, everything is apparently now in flux with COVID-19 and the Boston hotel market in a free-fall by all accounts.
•POWER HOUSE PARTNERS APPROVED FOR
BUILDING 108 The Board awarded tentative designation to Power House Partners LLC to facilitate the long term lease of the BPDA-owned Building 108 in the Navy Yard. Power House Partners LLC has proposed to replace this long blighted property with a 67,000 sq. ft. building that includes lab and retail space at this site, which will undergo Article 80 review with additional feedback from the community. The Power House Partners LLC proposal incorporates diversity and inclusion efforts throughout all phases of the development, building on the BPDA’s ongoing commitment that projects on agency-owned land advance equity and inclusion in Boston.
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