Now, with conditions in the commercial real estate sector on the upswing, some of those projects have started to break ground. In one high-profile case, however, a developer may be stalling on a planned project to maximize its returns and using the still challenging financing environment to its advantage.
When Vornado Realty Trust, a New York City-based diversified REIT, stopped work in 2008 on One Franklin Street, its $700 million, 1.2-million-square-foot mixed-use project in downtown Boston, it cited the grim economic outlook and difficulty in securing financing as reasons. Three years later, with no date set for construction to resume, Vornado claims it wants to sell out.
Yet given the economics of the, selling the property doesn’t quite make sense. Vornado would have trouble recouping its losses on the land today, but if it builds the project at a later date it will likely reap hefty returns, according to Dan Fasulo, managing director with Real Capital Analytics (RCA), a New York City-based research firm that tracks commercial real estate investment.
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