Exclusive Q&A: Boston Global CEO on Lessons from $3.5B Seaport Project
John Hynes III, CEO of Boston Global Investors, is a major force in the metamorphosis of the Boston waterfront from a dying industrial district into one of the hottest and biggest new urban neighborhoods in the nation. His project—the 6.3M SF, $3.5B Seaport Square being developed with Morgan Stanley—will be one of the most valuable new urban districts on the East Coast. How did he and his team do this? What’s happening there now?
Bisnow: How did you get investors to buy into the vision of a master planned, 21 project, mixed-use development at the waterfront? It was nine years ago, when the neighborhood was a tired commercial port district covered with bargain rate parking lots.
John Hynes: It’s all about relationship building. In 2000, I was with Gale International developing the One Lincoln Street office tower downtown—now, the State Street Financial Center. We brought in Morgan Stanley as the lead equity investor. We developed it for $350M; leased it and sold it in 2004 for $705M. Because of that, in 2005 I was part of the team invited by South Korea to be the master developer for New Songdo City. Morgan Stanley agreed to provide $20M in seed money. Once we secured development rights for 80M SF of mixed-use, it was a huge success. Seaport Square wouldn’t be happening without Morgan Stanley and the relationship that grew from One Lincoln Street.
Bisnow: When/how did the idea for Seaport Square take shape?
John Hynes: In ’06, a 23-acre parcel became available at the Boston waterfront. Morgan Stanley got wind of it and they brought us in because of One Lincoln and our experience planning a new city in South Korea. In 2011, I left Gale International and started Boston Global Investors with the same team that worked with me zoning and planning One Lincoln and New Songdo City. The master planning principles we learned there, we brought to Seaport Square. The team: Jamie Gerrity, Kevin Benedix, John, Charles Reid, Lenorad Conlin, David Wamester.
Bisnow: What makes Boston desirable for such a large project?
John Hynes: Few other cities have as much economic growth. For a small city, Boston has the unique advantage of big, renowned medical and educational institutions. From 2001 to 2011, when I traveled to South Korea every month, I constantly met people who seemed to know someone who went to school here. Unusual for a city, the Seaport Square site isn’t on the outskirts, it’s right downtown, on the water; a 10-minute walk to the Financial District; two T stops from Logan International Airport. It’s the only area in Boston where I-90 and I-93 intersect, which is a tremendous advantage. In 2004, the [publicly financed] $15B Big Dig, and Third Harbor Tunnel projects and the $4B Harbor Clean Up were completed to make the waterfront a more pleasant place that's easy to reach. Pictured working hard: John Hynes IV, Ryan Jones.
Bisnow: What’s the benefit of doing a master planned project?
John Hynes: The site is so big—23 acres—it can become an entirely new, 24/7 neighborhood with offices, hotels, residences, restaurants and retail. Because it’s a master plan, we were able to make 37% of the acreage parks and open space to bring in light and air. We worked with the Boston Redevelopment Authority to plan the development in such a way that it benefits the city by stitching together other, long disparate locations: Logan [Airport], the Financial District, Fort Point Channel and South Boston.
Bisnow: How is Seaport Square being financed?
John Hynes: With Morgan Stanley, we raised $100M in equity—90% from them, 10% from us—and brought in $150M in debt. To pay off the debt, we sold six sites with 3M SF of FAR. We retained the remaining 3.3M SF. We took an ownership position in One Seaport Square, the largest project now under construction. We're co-developing the entire project with The Berkshire Group, which is developing the residential—832 units—and with WS Development (250k SF of retail).
Bisnow: What surprises you about developing Seaport Square and the entire new Seaport District, where 6M SF by various developers is underway or recently completed?
John Hynes: The market is more surprised than I am that the Seaport District has been accepted as a destination already even though it’s only 30% done. Ten years ago, we forecast that it would become one of the most desirable parts of the city because of the vehicular access. The public infrastructure projects led to a huge change. I am a little surprised by Boston’s growth—75,000 new residents—and by the extraordinary residential demand from Baby Boomers.
Bisnow: Foreign investment in Boston commercial property has skyrocketed with foreign buyers accounting for 42% of the capital invested in 2014, compared to just 3% in 2012, according to Met Life. In the Seaport this spring, two of China’s largest life insurance companies—China Life Insurance Group and Ping An Insurance Group—chose Tishman Speyer’s $500M development on Pier 4 in the Seaport District (above) for their first foray into the US real estate market. Why?
John Hynes: Boston has long commanded respect, but hasn’t been a big global player like New York, Chicago, LA, San Francisco or Miami. Now for the first time, Boston is among the top three or four world markets for the reasons we discussed. Actually, the Chinese are latecomers. The Europeans—Swiss, French, English, Spanish and German pension funds—started coming here 25 years ago.
Boston Global Investors has attracted capital from the Chinese investor Celona for our latest project in Seaport Square: an $800M, 1M SF, three-tower development of apartments, condos and 125k SF of retail. It was recently approved by the Boston Civic Design Commission and comes before the BRA board in November.
Bisnow: What’s the rundown on development and construction at Seaport Square?
John Hynes: About half the projects (11) are underway, with everything (10 more) due for completion by 2022. Right now, we have in construction: four residential towers (1,150 units), 300k SF of retail, 450k SF of office, a 300-key Yotel and two parks. The largest project now being built, One Seaport Square, is slated for completion in spring/summer 2017. I’m renting a place there, so they have their first tenant.