MA officials approve part one of lease deal for $600M Boston air-rights project

Dive Brief:

The Massachusetts Department of Transportation (MassDOT) signed a $21 million, 99-year lease with developers of the Fenway Center, a $600 million mixed-use project that will be built partially over a section of the Massachusetts Turnpike, according to the Boston Globe.
Developers Meredith Management and Gerding Edlen will first build 313 residential units and 67,000 square feet of commercial space next to the turnpike while they obtain financing for the next phase, which will see a deck and 27-story tower constructed over the roadway, Engineering News-Record reported.
The developers must pay a $3 million penalty if they do not start the second phase by the end of 2020. They will negotiate a separate lease for that phase closer to the deadline. It would be the first air-rights project over the turnpike since 1983.

Dive Insight:

Air rights can be expensive and contentious, but when building in dense urban environments, developers are often left with no other options.

In April 2016, Property Group Partners (PGP) secured the air rights over a three-block portion of Interstate 395 so that it could move forward with the Capitol Crossing project in Washington, DC. Like the Fenway Center, it includes a deck with buildings overhead. PGP has said it will end up paying as much as $120 million for air rights.

PGP then hired Balfour Beatty to build the project's $196 million first phase, which the developer called the first "eco-district" in DC. When the project is complete, it will feature five buildings — one residential and four commercial — totaling 2.2 million square feet.

Air rights also came into play when developer SL Green was planning its $3 billion, 1.7 million-square-foot One Vanderbilt office tower in Manhattan. SL Green was in talks with the owner of nearby Grand Central Station, Midtown TDR Ventures, over air rights when rezoning changes allowed the developer to move forward on construction without paying Midtown a dime.

Midtown cried foul and took SL Green to court, claiming that the air rights over Grand Central would have brought them $880 per square foot if the city had not intervened. SL Green eventually settled the lawsuit with Midtown for an undisclosed sum and agreed to pay for infrastructure improvements around the station.