Market Overview



1.0 Market Analysis

Our market analysis began with a review of the economic health of Boston in relation to similar cities and to the US economy as a whole. The purpose of these comparisons is to judge not what we should build, but whether we should be building at all.

The US Economy and Boston

With rapid globalization transforming the US economy, the spread of industries within the US has changed significantly. Manufacturing within the US has declined consistently, due to the off shoring of production to Asian countries, especially China. Outsourcing to countries such has India has also eroded the service industries (call centers, data entry, software etc.). The US remains strong in most hi-tech industries, research & innovation, education, financial services and tourism. Going forward these high value-add industries will generate an increasing percentage of US revenues.

Boston is strongly positioned in all these sectors. With MIT, Harvard, and several other world class institutions, Boston

is a leader in education as well as high tech research and development. Boston is also home to some of the largest financial and consulting firms in the US. As a result of being at the crossroads of industry, and research & innovation, Boston is an attractive destination for conventions, which has a positive impact on the hospitality sector. As a city with historic significance in the US, tourism is also an important contributor to the Boston economy.

Market Analysis

The aim of the market analysis is to forecast the Boston MSA economy over the next ten years. This was done by addressing the following:

• Regional: Comparative study of Boston with other competing cities

• Local: The direction of the Boston economy specifically.

• Highest and Best Use: The study of trends and cycles of Boston’s real estate products.

Regional: Comparative Study of Boston with Competing Cities

Although Boston[1] seems to be strongly positioned within the US economy, there are several competing cities that have similar strengths. To understand Boston’s position within a competitive market, and ability to attract firms, workers, and residents relative to other similar cities, San Francisco and Seattle were selected for a comparative analysis.

Local

Once we determined Boston’s competitive position as an urban center, we looked more specifically at population, income, employment, and specific industry trends in the Boston metro area to determine growth prospects for the future, in support of new development.

1.1 Regional Market Analysis

San Francisco and Seattle were selected for a comparative analysis, based on the following similarities. Figure 1 offers a quick, static comparison of the cities:

• Population size between 3-4.5 million

• Employment profile between 2-3 million

• Strong industry research centers

• Strong educational institutions

• Strong tourist centers

• Waterfront cities – land-locked, ports

• Many corporate headquarters or significant offices of large companies

We see that Boston has the highest total employment, second highest per capita income, and lowest vacancy rate positioning it well for future growth in the market.

A comparison of the cities’ significant demand drivers follows. We examined the historic changes in population, employment, income and vacancy rates (in terms of real estate). The comparisons, illustrated in the following graphs, demonstrate the cyclic nature of growth. All data is from the US Census and Bureau of Economic Analysis.

Population

• The growth in all three MSA’s was below the US average in 2003, the most recent year for which data was available.

• A decline in growth began before the 2001 recession.

• Completion of the Big Dig and recent opening of the underground central artery will have a significant impact on future growth prospects for Boston.

Conclusion: Boston has hit historic lows and is recovering from the trough of the cycle. San Francisco is already showing signs of recovery and we expect Boston to follow.

Employment

• Employment has been declining in all three MSAs’ since the recession, and is still below the national average.

• Growth has begun to increase for all three MSAs in 2002 but is still below the US average.

• Boston and San Francisco will compete for employment from education and health, and from professional business services, which are the top two industries for both cities.

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Vacancy

• In 2003 there was a significant vacancy rate decline in all MSA’s except Boston.

• However, Boston had the lowest vacancy and in 2004 at 4.9% is significantly below the US average of 6.1%.

• Boston, as an older and more mature market, has had smaller fluctuations.

• Boston is close to a historic high in the cycle. We can expect upward pressure on vacancy from the increasing number of new completions, but downward pressure from interest rates slowly rising.

Conclusion: Boston is showing positive trends in employment and income, and with completion of the Big Dig is well positioned to increase population and compete with San Francisco in key competitive industries as discussed above, which will keep absorption and vacancy stable.

However, Boston has shown significant sensitivity to economic recessions, suggesting increased uncertainty and risk in any investment. Also, the cost of doing business in Boston is approximately 40% above the national average, which deters the spawning of new companies and could result in flight of existing companies.

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1.2 Metro Boston Analysis

In addition to comparative statistics for employment, personal income, and population growth for three regional markets through 2003, we examined key demand drivers for the Boston market.

Based on a forecast of the Boston economy through 2008, the city appears to be in a strong position for economic growth in the next five years. The forecast used several real estate data sources and examined key demand drivers.

Industry Specifics

On a national level the greatest declines in employment in the last 5 years were in manufacturing and information, and Boston’s greatest declines were in these same industries. However, in the last 12 months 2 out of 3 of Boston’s greatest increases were in education and health, and professional and business services, which are Boston’s 2nd and 3rd leading industries.

Projection for national growth in the next 5 years is highest for these same industries, plus hospitality and leisure, suggesting that Boston is leading the national curve for growth in these top industries.

Note that in most cases the growth rate is below the US average, which may be due to the lower presence of such industries in the economies of other cities. In other words Boston may have a lower percentage increase but greater absolute increase

Employment Growth

TWR projects the total employment in Boston to grow at an average 1.1% over the next 5 years. At present Boston seems to be nearing a peak, however we are still well below historic peaks and this suggests that the TWR forecasts are conservative.

Personal Income Growth & Population Growth

Similarly, in both these cases Boston is projected to grow at 1.7% (Personal Income) and 0.4% (Population growth) over the next 5 years – a conservative forecast, representing minimal risk.

The projected growth in demand drivers have been tabulated in Figure 7. Most importantly, we see increasing rent inflation over the next 5 years.

In Sum

After the downturn associated with the 2001-2002 Tech Market Crash, all three indicators have been positive and are projected to continue to grow for the next five years. The most important demand driver, employment growth, will grow more during the next five years than the previous twenty-five years[2]. As a result: (1) Net Absorption will be positive for the next five years, (2) Rent Inflation will be above CPI inflation and (3) Vacancy Rates will remain below the critical 5% level[3], indicating that Boston will remain a “landlord’s market”.

At present the demand drivers in the Boston economy are well below historic peaks. Using the TWR projections in our subsequent demand analysis will provide a conservative estimate and any increase will provide a significant upside.

The Boston economy is recovering from a period of negative growth and we do not foresee a decline in growth rates over the next ten years.

1.3.1 Best Use Analysis: Market Indicators

In the second part of this report, we present analysis of four property types including retail, hotel, office, and multifamily for-rent, and draw conclusions about the best product for the site, based on 1) the Boston economy, 2) current supply of uses in the South Boston neighborhood, 3) permitted uses and regulatory requirements for the site, and 4) suitability of uses based on specific attributes of the site.

Hotel

We chose not to do an in-depth analysis of hotel because over 1,600 hotel rooms are currently in the pipeline for South Boston which suggests the danger of oversupply. Our team used historical and forecasted data from the Torto-Wheaton Research (TWR) website to conduct our analysis. Furthermore, our site has difficult ingress and egress issues, which make a use with high traffic less appropriate.

Retail

The retail analysis indicates decreasing rates of rent inflation and only slight increases in net absorption. Although the Boston retail market is not saturated at present, the forecast over the next 5 years is not encouraging and projects an over supply to the metro area. See figures 10 and 11 which illustrate the retail trends.

Office

Although the generally high Boston office vacancy rates and decreasing net absorptions coupled with increasing completions in 2007 onward provides an uncertain long term outlook, we also see slowly increasing rents and decreasing vacancy showing an improving market. (See Figures 12 and 13 on the next page.) The market continues to be saturated with completions from the late 1990s and this over-supply will maintain downward pressure on rents over the next 10 years, though on the positive side, rents and vacancy are both stabilizing.

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Multi-Family

The multi-family housing market in Boston is well placed for stability over the next 10 years. However, it is important to clearly identify a growing market segment as the customer base and create a niche product to further differentiate and ensure a faster absorption within this market segment.

The following trends will impact the demand for multi-family housing in Boston:

• Vacancy rates are forecasted to increase from 4.2% to 4.9% in 2010. This is a minimal increase and well below the historic high of 5.5%.

• Rent inflation is projected to increase from 1.3% to 3.7% above inflation in 2010 – an attractive indicator for apartment development.

• Net absorption is forecasted to decrease significantly, but is coupled with a decrease in completion rates.

Data suggests that the for-sale condo market may have already peaked. Following a few years of increasing condo sales, the first nine months of 2005 saw a 12.3% decline in sales according to Listing Information Service, which tracks the Boston condo market. For comparison purposes, 2004 sales increased 32% from the prior year. Additionally, economists have argued that falling

sales are expected based on high prices, rising interest rates and falling consumer confidence about the economy and the value of real

estate.[4] Based on TWR's projections of increasing rents combined with a weakening for-sale condominium market, we have chosen to pursue a for-rent project

In Sum

From an economic market perspective, the best use is multifamily for-rent. While it does not provide a strong growth-oriented outlook, the market will be stable enough for the next 5-10 years to support a small 70-unit development. Second, while office has not been a good investment in Boston in recent years, market indicators are stabilizing enough to warrant a small amount of office space on the first floor of the building, particularly given the site’s proximity to the convention center and neighboring hotels. In both markets (office and multifamily), product differentiation and conservative rental rate estimates will be the key to maximizing the absorption rate.

|Product |Boston Market |Completions |Absorption |Vacancy |Rent |

|Retail |Not strong, | | |NA | |

| |declining | | | | |

|Hotel |Not strong, | |NA |NA |NA |

| |improving | | | | |

|Cultural/Civic |N/A | | | | |

|Residential |Stable, holding | | |~ | |

| | | | | | |

1.5.1 Competitive Analysis: Target Market

Market Area Delineation

The 505 Congress Site is located in the South Boston Waterfront District. In delineating a market area, we used geographical, transportation infrastructure and demographic criteria. Our rough market area delineation appears below:

Because the site abuts Downtown Boston and generally consists of high-density urban infill structures, the target customer should place high value on living in proximity to employment, cultural and civic centers. Additionally, the target customer will be indifferent or prefer city living. Identification of this segment will simply rely on the consumer’s past behavior: those who have chosen to live in high-density areas with close proximity to the downtown will likely continue to do so in the near future. Generally, the five-mile radius shown above consists of higher density communities.

We assume our target segment places high value on convenience of location given their willingness to pay higher costs to live downtown, and thus the transportation infrastructure and proximity will further pinpoint our market area. Based on the average commute time of 27[5] minutes (U.S. Census 2002) in the Boston Metropolitan Area, we have selected a conservative 20-minute drive time as the outer limit of our market area since our urban-oriented customers will value proximity more than the average commuter. This 20-minute limit also coincides with the extent of the Boston subway system, another common mode for city-dwellers, which further reinforces the validity of our selected five-mile radius.

Target Users

Demographically, the five-mile radius primarily consists of many market segments, as defined by Claritas, a provider of marketing-relevant demographic data.[6] Of these, three groups emerge as target consumers for our project. Those groups are:

• Urban Achievers (19.74% of the population)

• Bohemian Mix (18.68%) and

• Young Digerati (13.16%).

While different in subtle ways, these groups are all generally young, educated, employed in service-based jobs, ethnically mixed and more affluent than average - the ideal segment for our proposed multi-family urban development.

The demographic within the five-mile radius indicates the largest proportion of jobs in services[7], with significant portions of jobs also in the retail trade, finance-insurance-real estate, and government sectors. Using data from 2004, the graph below shows that service-based jobs, combined with financial, insurance and real estate account for nearly 75 percent of total employment in the five-mile radius area.

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The predominance of service-based jobs results in a relatively affluent population base, as shown in the figure below. Based on the census data that suggests that households typically spend 20-30% of gross salary on rents, our target market will consist of households earning $65,000 - $125,000 per year. We believe that individuals earning more than this will seek higher-end residences. While those earning below $45,000 a year comprise more than 50% of the surrounding population, nearly 40% of the households earn $45,000 to $125,000, indicating that our target demographic, in terms of income, is well represented in the five-mile radius surrounding the site.

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Conclusion

Demand for multi-family housing generally increases with population growth, personal income growth and most importantly employment growth. Based on the data shown in the preceding section, multi-family development remains very attractive for this area. Boston, and more precisely the five-mile radius around 505 Congress Street, continues to provide significant opportunities for multi-family development projects.

1.3.2 Best Use Analysis: Supply

The supply analysis incorporated several different levels of inquiry. The broadest level is the outlook for supply in the Boston MSA of residential units. Next, we looked at comparable projects based on a population with our target customer or a strong similarity in product type/location. Finally, we examined the supply in the immediate neighborhood.

Supply in the MSA

At the Boston MSA level, we found that residential development continues to be a strong industry. Cap rates for residential are at 4.45% (Korpacz, 2005), indicating the relative low-risk of such projects. According to a November 18, 2005 Boston Globe article, Boston’s residential building boom today rivals the building spree of the 1980s with the number of projects equaling or exceeding that time period, as well as three times the demand. The City’s planning department reported nearly 14,000 units in the pipeline for Boston, of which most are condominiums. The article also noted that South Boston has the most units in development in the city, and the strongest demand is by young professionals 20-34 years old, who make up a 1/3 of the city’s population. Considering that the majority of projects are for-sale but the population with the highest demand also make up the most mobile workforce the US has seen, we believe there is ample opportunity to provide a for-rent project that is differentiated by virtue of its product-type.

Determining the status of the building cycle tells us where Boston is headed in terms of near term supply of multifamily units. The completion data presented here is the most important factor in forecasting supply. According to the chart (see highlighted portion), the Boston market will reach the peak of construction in 2005. After the peak, the nominal estimates of completed units will decrease starting in 2006, to just slightly over 3,000 in 2010. The flattening of the completion rate shows that gross supply will tighten over the next five years, and also may indicate that the bottom of the building cycle will occur around 2010. However, absorption is also decreasing which is a concern.

Comparable Projects

To utilize comparison projects for setting rents and design for our project, we first had to determine what makes a comparison project. We looked at projects that exist in areas from which we expect to draw renters—in other words, what types of products do our target customer currently occupy? Based on a study from Coldwell Banker and discussions with local real estate brokers, we identified Downtown Boston and Cambridge as key draw areas. We also looked at projects that were similar in product type and environment as our proposed project, such as developments along the waterfront in Quincy and Charlestown. We also looked at comparison projects for South Boston (discussed in next section).

Downtown Boston and Cambridge

According to data provided by Coldwell Banker residential brokerage services (40% of Massachusetts market share for residential sales), there have been over 2,921 inquiries for space in South Boston in the last quarter. Of these, 601 came from Boston (primarily Downtown) and 140 came from Cambridge. We verified the potential draw of South Boston from Downtown Boston and Cambridge through conversations with brokers, property managers of residential for-rent in these areas, and young professionals who work in Downtown Boston.

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Source: Coldwell Banker Residential Brokerage, “New England Moves,” February 2006

In looking at Cambridge, we found that there is a considerable supply of rental properties due to the size of the student populations of MIT and Harvard. However, a relatively small proportion is multifamily residential with more than 50 units. We identified several recently opened properties in the University Park area of Cambridgeport which fit our comparison criteria including 91 Sidney, the Kennedy Biscuit Lofts, 100 Lansdowne, and Loft 23. (These projects are described in greater detail in the following chart and discussion of comparable properties.) Speaking with property managers for these projects revealed a growing interest by renters in the look and feel of finishes as opposed to common amenities on site, such as a “club room.” This new image for apartments, is differentiated from the old fitness center/ pool/ carpeted units model by offering wood floors, granite counter tops, loft layouts, wireless café, and a rooftop lounge. This design would appeal more to our target market of Urban Achievers, Bohemian Mix, and Young Digerati and will help differentiate the subject site in the market.

In looking at Downtown Boston, we found that there is a dearth of residential for rent, particularly in the Financial District. While conversion of office space to residential remains a popular trend, in nearly all cases the residential consists of condominiums. The few rental projects are billed as luxury, such as 1 Devonshire Place. Because there is such a low supply of for-rent product in the Downtown, we looked at condos for-rent by their owners as a proxy for supply. A rough cut of all Downtown condos advertised for rent on (widely acknowledged to be the most popular tool for young professionals looking for apartments) for the first week of March 2006 resulted in similar figures to those found in our other comps. See Table X.

Comparison with Similar Products in the Market

Differentiation is not only important within South Boston – It is also critical that our product stands out or meets a specific need within our projected five-mile radial draw. We have identified twelve projects for the purposes of comparative analysis, which are all within the 5-mile market area. We chose competitors based on the following:

• Location – all sites (except one) exist in neighborhoods similar to the South Boston waterfront area. These include the redeveloped Charlestown Navy Yards, the Quincy Marina, Revere Beach, and Dorchester Bay. The comparison sites are also located on or near waterfronts.

• They are all accessible to downtown via the local subway.

• We included one site on the waterfront in the North End to test the difference in value for a site not located in a semi-isolated location.

Details of the comparative assessment are included in Table XX. Our observations from competitor sites are:

• Park Lane is the most direct competitor to the subject site, because it is only 3 blocks away and is a new building with water views. It is a mid to high-end project with 150 units currently for rent, and an additional 350 units under construction. The project has ground-floor retail space, planned for restaurants. Despite its “pioneering” risk, the 1st phase of the project was 40% leased in its first two months of operations.

• All sites had attractive landscaping and were clean.

• All sites offer some combination of the usual amenities including pool, laundry, dishwasher, carpet, parking, fitness center, sports.

• Most appear to be within a short walk to grocery stores and the train station.

• A number of comparison sites have unobstructed views of the waterfront and/ or skyline, and do not have the drawbacks of the vent/ exhaust building and tunnel adjacent to the site. This suggests that to remain competitive, rents will need to be set below those of sites like Park Lane to offset the negative aspects of the subject site.

The existing comparable sites present several challenges:

• Several sites, though minimally rehabbed, are somewhat outdated and do not directly compare to a newer site like Park Lane.

• Larger sites, such as Harbor Point with 1,200 units and Water’s Edge, are hard to compare because of differences in economies of scale.

• Several have views of waterfront and city skyline, and we anticipate that by comparison, when fully developed, other South Boston properties will block views for the subject site.

• The subject site, at approximately 70 units, is smaller than all comparable sites.

Further development of building design for the subject property will inform adjustments to the comparable rents to determine appropriate rent levels for the site, using Park Lane as a maximum threshold.

Table X

|CONDOMINIUMS FOR RENT |  |  |  |  |  |  |

|South Boston |2100 | | |new, luxury |private laundry, | |

|Downtown |Rent/month |SF |Parking |Type |Other |

|Downtown |1800 | |1 |luxury |on-site laundry, parquet floors, 24-hr concierge | |  |

|Prudential |1920 | |1 |luxury |laundry on floor, fitness center, 24-hr concierge | |  |

|Financial District |2245 | |1($400) |luxury |heated indoor pool on 42nd floor, | |

|Financial District |2100 | |1 ($265) |luxury |fitness center, courtesy bicyles, concierge | |  |

|Financial District |1650 |

|  |

|  |Residential: 336 units |

|  |Retail: 554,000 SF |

|BRA Board Approved |

|  |Residential: 1,100 units |

|  |Hotel: 875 rooms |

|  |Cultural: 18,900 SF |

|  |Retail: 169,000 SF |

|Permitted |  |

|  |Residential: 320 units |

|  |Office: 840,000 SF |

|  |Retail: 1,100,000 SF |

|Under Construction |

|  |Residential: 858 units |

|  |Hotel: 790 rooms |

|  |Cultural: 65,000 SF |

A closer look at the residential inventory for South Boston indicates that we may be able to insert our project into the pipeline at a point before saturation and after some pioneering projects have been completed to validate the area to our potential consumers.

| |Res (d.u.) |Office (sf) |

|Total |2,614 |2,425,000 |

|Under Review |336 |0 |

|BRA Board Approved |1,100 |1,585,000 |

|Permitted |320 |840,000 |

|Under Construction |858 |0 |

|*North of St. Vincent | | |

The vast majority of residential units in the pipeline are documented as for-sale. Because of anticipated changes in interest rates, we expect that some of these units may be converted to rental. It is also worth noting that most of the projects are described as high end or luxury units. Providing a mid-range project may provide another means of differentiation.

Conclusion: South Boston is the Boston neighborhood for development and the time to get in is now.

1.4 Highest & Best Use

Given the market analysis and what is planned for the area, we feel that our strongest opportunity is for-rent residential. This product is also best supported by our site constraints and opportunities, discussed in the site analysis section. However, due to the less-than-optimal site location, it will be important to market this building to customers as a value opportunity, with lower rents than other properties nearby. Another opportunity for differentiation from other product in the area, and a counterbalance to the “grittiness” of the neighborhood, would be the creation of the first LEED-certified project in the area.

Second, we see a potential to leverage the strategic location of the site by providing an ‘office on demand’. The ‘office on demand’ concept provides fully furnished offices with complete a/v facilities, conference rooms and secretarial services, which can be rented on a daily or monthly basis, with the following potential clients:

• ‘Incubation companies’ requiring flexible Class A office space without the long-term commitment of traditional leases and the high up-front costs of furniture, fixtures and equipment.

• Business visitors to the Convention Center who require scaled conference facilities and access to secretarial services catering to their need to present/interact with newly developed business associates.

• Consultants visiting Boston on a project basis and requiring fully functional office space and secretarial services. Space will be leased for the tenure of the project (often more than a month).

• Residents of our apartment (or surrounding) who can work from home and yet require the focused environment and facilities of an office.

After discussions with operators in this business we have found that there is sufficient demand, and our site is an attractive location due to proximity to both the central business district and the convention center. We would lease the space to an operator such as Regus who specializes in the ‘office on demand’ business, though the use of a long term lease paying office market rents.

1.3.3 Best Use Analysis: Regulatory

Boston’s permitting process is known to be lengthy; two years to permit a large project is not atypical. Because of the risks associated with long entitlement processes, it is critical that we have a more complete understanding of the regulatory framework and trends regarding our site.

There are two themes that have emerged from our investigation of the regulatory framework, which we believe bodes well for our proposed development site. The first is that substantial planning and politicking has gone into development of South Boston in the last five to ten years. We are in a better position than earlier developers in that we benefit from a clearer framework for development, a clear push on the part of the BRA and initial developers for creating a “24-hour vibrant, urban neighborhood,” and carefully crafted relationships with key community members and organizations. Over $20 billion has been spent in South Boston in recent years, as can be seen by the carefully selected street lamps that are currently illuminating parking lots, among other indicators.

The BRA offers several studies and planning documents to guide our strategic planning for the site: the South Boston Waterfront Public Realm Plan, South Boston Waterfront Municipal Harbor Plan, and the Save the Harbor/Save the Bay’s Economic Impact Report and the Seaport Alliance for Neighborhood Design’s newsletters provide perspective. These reports describe South Boston as a 24-hour, pedestrian-friendly, waterfront-oriented, quick-to-grow neighborhood.

Second, the BRA has created zoning specifically for the Boston Harborfront District. Our site, 505 Congress Street, is located within the South Boston Waterfront Interim Planning Overlay District (IPOD) and is governed by Article 27P, which supersedes all other articles including Article 42E. The site has an as-of-right FAR of 4.0. This translates to roughly 121,000 gross square feet and a maximum height of 150’. The site is also within a planned development area, which provides more flexible zoning.

• Article 27P describes several criteria which the project would need to meet in order to be permitted under a planned development area, such as meeting affordable housing requirements of 10-13% or an in-lieu fee. (While 27P still has the requirement listed at 10%, the Mayor and BRA have consistently been pushing developers to provide 13%.) “Affordable” is defined as: 30% or less of the household’s adjusted income is required to occupy the unit, at 50% of Area Median Income.

• In the case of the planned development area, the maximum FAR would be 4.25, with a maximum height of 155’

• Maximum height could be increased to 255’ if the project met the Large Project criteria. At this time, we anticipate pursuing the higher FAR.

• Permitted-as-of-right uses include multifamily housing, retail, office and hotel.

• Parking garages are listed as conditional, with no discussion on whether this applies to below grade parking. No separate parking ratio is identified for this area. Below-grade parking is not counted in FAR.

• Other relevant requirements include and providing a pedestrian-friendly site.

Design guidelines for the area focus on waterfront views, pedestrian experience, and stepping building heights down toward the water.

1.3.4 Best Use Analysis: Site

Our site analysis is based on several physical and regulatory/permitting attributes of the site at 505 Congress Street. The data for our site analysis was gathered from visits to the site and research done on regulatory issues. It is important to note that this is not the complete site analysis and a more intensive analysis needs to be conducted as we move forward, including a detailed soil and environmental analysis. Overall, the purpose of this initial site analysis is to determine whether our site may or may not be suitable for development:

Description/History

• Centrally located in South Boston Waterfront District.

• Owned by NStar (received in ‘Big Dig’ land swap).

• Most recently used as a staging area during ‘Big Dig’ construction.

Physical Attributes

• 0.70 acres (34,730 sq ft) football-shaped lot.

• Level site with minimal modifications and/or improvements required.

• The site contains zero hydrological or vegetation considerations.

• The footprint of the lot is outside the adjacent tunnel footprint.

Zoning/Regulatory Attributes.

• The site is not currently permitted for development (Boston Globe 9/21/05).

Infrastructure/Linkage Attributes

• The site contains the necessary utility infrastructure and capacity including municipal water and sewer.

• The vehicular traffic flow and traffic pattern around the site may affect both ingress and egress to our location. 505 Congress Street is bounded on both its east and south side by the I-90 highway tunnel entrance. The north side of the site, approximately 200 feet, is bordered by Congress Street, a divided road with no access, essentially cutting off our site from westbound traffic on Congress Street, and the lane adjacent to the site is designated for access to the tunnel entrance. The western side of the parcel, bordering Haul Road, has the best ingress/egress potential, but this road mainly carries traffic exiting the eastbound tunnel into South Boston, and is also currently a one-way street. There is a real need to create viable intersections to control vehicular traffic in and out of the site.

These restrictive boundaries also limit pedestrian access which, while possible, is not attractive. Most Commuters at the Silver line stop will either walk south towards the BCEC or north towards the World Trade Center and/or Waterfront on the opposite side of Congress Street.

• Minimal walking distance to MBTA Silver Line (< 1/4 mile).

• Retail services for the area are in the pipeline as shown on page 15.

• The site is located within ½ mi of the convention center.

Dynamic Attributes

• Image/visual factors

Vent Building #5, a large 176’ structure that serves as an intake and exhaust point for the adjacent Fort Point Channel Tunnel, has a negative affect on the visual approach to our site. This vent building severely limits views and visual images to the southeast of our site.

The entrance to the westbound Fort Point Channel Tunnel runs along the entire back length of our site. This will negatively impact the visual impression of the site.

There are currently unobstructed views to downtown Boston and the CBD to the northwest, but 4.5 million square feet of approved development in the area will eventually block views in all directions.

• Noise. Noise pollution may be a factor due to the adjacent tunnel entrance and vehicle traffic.

Environmental

• Soil conditions. The condition of the soil is unknown and may have been impacted by nearby tunnel construction.

• Hazardous material. The status of hazardous material on site is unknown, but possible. An in-depth study is needed.

Conclusion: Based on the site constraints and opportunities, residential and hotel uses would be appropriate from a building, ingress and egress, parking, and position within the streetscape standpoint.

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[1] For our study, the Boston MSA is defined as Essex, Middlesex, Norfolk, Plymouth, Suffolk and Worcester counties in Massachusetts, and Hillsborough, Rockingham, and Strafford counties in New Hampshire.

[2] Torto Wheaton Research

[3] IBID

[4] Comments by economics professor Karl Case of Wellesley College.



[5] R04T160.htm 

[6] Claritas report produced using Claritas iXpress based on 2004 data. More info:

[7] Claritas report produced using Claritas iXpress based on 2004 data. More info:

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Figure 6: Vacancy Comparisons

Data Source: Torto Wheaton Research Fall 2005

• Seattle is focused mostly in the government sector, with hospitality and leisure, education and health, and retail trade all tied for third.

Conclusion: We have hit historic lows and can safely assume that we are recovering from the trough of the cycle. However, Boston is recovering more slowly than the U.S. as a whole.

Personal Income

• Growth began to increase in 2002, but was still below US average.

• Personal income in Boston was severely affected by the recession, due to its reliance on business services and technology industries, but is showing marked improvement since 2002.

Population (mil.)* 4.43 4.16 3.14

Total Employment (mil.)* 2.97 2.69 2.01

Per Capita Income ($000) 43.14 46.96 38.01

Vacancy Rate (%)** 6% 6.9% 10.8%

Rent ($/unit)** $ 1282 $ 1341 $ 808

*Data 2003 Census

** Data 2005 Apartments Various sources

Seattle

Figure 4: Employment Comparisons

Figure 1: Boston & Comparable MSA’s

Figure 6: Vacancy Rates Comparison

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Figure 5: Personal Income Comparisons

Boston

San Francisco

2004 2007 2010

Employment(1000) 2,896 2,995 3,079

Personal Income($ bil.) 256.8 269.9 282.6

Total Inventory (units)* 410,107 426,125 435,582

Completions (units)* 4,002 4,273 3,029

Vacancy Rate (%) * 4.9% 4.7% 4.9%

Net Absorption (Units)* 6,745 3,921 2,524

Rent Inflation (%)* -2.2% 3.4% 3.7%

*For multifamily properties only

Figure 9: Projected Growth in Demand Drivers for Boston

Data Source: Torto Wheaton Research Fall 2005

Figure 7: Comparison of Demand Drivers

Data Source: Torto Wheaton Research Fall 2005

Figure 8: Comparison of Demand Drivers

Figure 2: Population Trends in Comparison

Figure 3: Employment Comparisons

Figure 10: Retail

Data Source: Torto Wheaton Research Fall 2005

Figure 11: Employment

Data Source: Torto Wheaton Research Fall 2005

•

Figure 12: Office Trends

Data Source: Torto Wheaton Research Fall 2005

Figure 13: Multi-Family Trends

Data Source: Torto Wheaton Research, Falll 2005

Table 1: Summary of Market Favorability by Sector

Table 2: South Boston Projects (north of St. Vincent)

Table 5: South Boston Residential Projects

Source: Boston Redevelopment Authority Fall 2005

Table XX

Figure 16: Household Income Statistics within 5-mile radius of site

Data Source: Claritas 2005

Figure 15: Employment Statistics within 5-mile radius of site

Data Source: Claritas 2005

Figure 14: Target Market Area (5-mile radius; transit lines shown)

Data Source: Google Earth,

Figure 17: Boston Multi-Family Forecast

Data Source: Torto Wheaton Research Fall 2005

Figure 18: South Boston Harborfront, Use Map

Data Source: Torto Wheaton Research Fall 2005

Figure 19: Existing Conditions

Source: Meredith & Grew flyer

Figure 20: Projected Haborfront Development

Source: Meredith & Grew Marketing Flyer

Note: Subject site is #1 in figure

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