One Franklin Street, Boston

New construction projects ranked high on the list of casualties during the recent downturn. Some developers postponed building new centers because they were fearful that returns on investment would fall short of expectations. Others found they couldn’t get financing, or had the misfortune of seeing previous commitments scrapped because of lender bankruptcies.

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 deal, 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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