The contentious Downtown Crossing project in Boston might finally be gaining traction as discount retailer Target mulls opening a store near the site.
On Tuesday Boston Redevelopment Authority (BRA) Director Peter Meade confirmed the Minneapolis, Minn.-based discounter has been looking at several sites in the city, including in the former Filene’s Basement building near One Franklin Street.
The 1.2-million-square-foot mixed-use project has been lingering unattended since 2008, when developer Vornado Realty Trust stopped construction, citing financing troubles.
Target would be the perfect candidate to put some life back into the property, according to Howard Davidowitz, chairman of Davidwoitz & Associates Inc, a New York City-based retail consulting and investment banking firm. It’s popular with people from multiple income brackets and tends to draw crowds of shoppers.
“To move this project forward you need a destination that’s going to drive a huge amount of footsteps,” Davidowitz says. “No one can compare to Target in terms of being a destination and generating traffic.”
Earlier this year, Target Corp., which normally operates megastores averaging 135,000 square feet, launched a small format store called CityTarget as a means of breaking into urban markets. The retailer already announced one such store in a historic landmark building on South State Street in Chicago. That store will total approximately 54,000 square feet.
Boston appears to be its next mark, according to comments made by Meade during a breakfast meeting presented by the Greater Boston Chamber of Commerce.
The vacant Filene’s property in Boston contains approximately 250,000 square feet, including its basement, and is listed in the National Register of Historic Places. Given that the location is only two miles away from Target’s store at South Bay Shopping Center, however, the deal would have to be a bargain for the retailer, notes Robert Sheehan, vice president of research with KeyPoint Partners, a Burlington, Mass.-based commercial real estate services firm.
The Boston Herald cites a potential price tag of $30 million for the building.
A Target spokesperson confirmed that the retailer is exploring options for a new store in Boston, but would not reveal any details about the search. Vornado declined to comment.
Fight or flight
Since Vornado stopped work on One Franklin Street, it has become not only an eye sore for the city of Boston, but a source of tension between Vornado executives and Boston Mayor Thomas M. Menino.
After Vornado chairman Stephen Roth made some curious public remarks about his approach to urban redevelopment in 2010, Menino has voiced suspicions of Vornado’s reasons for delaying construction on the site, which was supposed to the centerpiece of his efforts to revitalize the entire Downtown Crossing area. While Vornado has said it wants to sell One Franklin Street to another developer, some in the industry suspect it might just be holding out on finishing the project until it can reap maximum returns.
The fight reached a new heights this July, when Menino called Vornado execs “a scurrilous group that should not be in the real estate business” after giving a speech at an ICSC conference. “They want $165 million for that location when the market says it’s not worth it,” he added, according to numerous reports.
Vornado paid $100 million for the 656,000-square-foot property back in 2006.
Earlier this year, investors paid a median price of approximately $105 per square foot for multi-tenant retail centers in Boston, according to Marcus & Millichap Real Estate Investment Services, an Encino, Calif.-based real estate services firm. The figure represents a 25 percent discount from prices paid a year earlier.
If Target ends up taking the remaining Filene’s Basement space at Downtown Crossing, the move might help the image of the entire site and allow Vornado to charge more for the property, notes Paul Stanislas, Boston-based vice president in the retail group of brokerage firm Grubb & Ellis.
Earlier this year, Grubb & Ellis’ Boston team sold a building at 407 Washington Street, a 21,956-square-foot mixed-use property across the road from the Filene’s building, for $3 million. The deal proves that investors are interested in the area, according to Stanislas.
“It’s about the best spot on the street,” he says about the Filene’s building. If Target comes in, Vornado might be “able to go ahead with the new development on its own or sell it for a better figure. That corner needs to be brought back to its former glory and I think someone like Target would do a great job in generating traffic.”