Vertex deal a key in remaking of waterfront area
In one of the largest office deals in recent Boston history, drug maker Vertex Pharmaceuticals Inc. will move into two new buildings in the Seaport District, catapulting the city’s effort to transform the waterfront into a neighborhood of technology companies, academic institutions, and medical firms.Vertex yesterday signed a letter of intent to relocate its headquarters from Cambridge to the Fan Pier complex in late 2013. The 23-acre development has just one tower now, but is slated to have eight buildings of offices, residences, stores, and hotel rooms, as well as parks and a marina.
The deal is a watershed in Boston’s campaign to court a biotechnology industry that has largely eluded it, with most drug companies preferring to be closer to Cambridge’s prestigious universities or out in massive suburban office parks that offer cheaper rents and room for expansion.
Vertex’s relocation is also a huge boost for Fan Pier developer Joseph Fallon, who will soon be able to resume construction after a recession that dried up funding for large-scale projects in Boston and across the country.
“This is a jump-start for the entire waterfront,’’ said Mayor Thomas M. Menino, who has been trying to remake the area into an “Innovation District’’ by offering incentives to companies to locate there. “Vertex has made the decision to be on the forefront of the Innovation District, and that decision will lead other companies to follow suit.’’
Terms of the deal have not been disclosed, and the company has not yet signed the lease. The lease is contingent on an unusual clause: Vertex must receive federal approval of its first major in-house commercial drug, telaprevir, a treatment for hepatitis C. US regulators are expected to act on the company’s application by June.
Vertex would occupy about 1.1 million square feet, filling a pair of 18-story buildings at Fan Pier, with an option to expand into a third to be built there. Vertex’s portion of the $2 billion Fan Pier complex is estimated at $800 million, according to state officials.
State and city leaders are providing Vertex with a substantial tax break and other inducements to help close the deal. Vertex’s lease will require it to pay real estate taxes on the new buildings. Boston will provide Vertex with an $11.8 million reduction in property taxes through 2018.
But even with that reduction, the new buildings will result in $58.1 million in additional tax revenues for the city over that period, Boston officials said.
The state, meanwhile, will provide $10 million in tax breaks in exchange for Vertex creating 500 additional full-time jobs by 2015. Massachusetts will also borrow $50 million for roads, water and sewer, and other necessary infrastructure, to be repaid with tax revenues generated from Vertex’s buildings.
Any shortfall in revenue needed to pay off the state’s bonds would come from the City of Boston or from the developer.
“This will help to launch one of the largest construction projects in the country at a time when a lot of people in that industry still need work,’’ said Gregory Bialecki, Governor Deval Patrick’s economic development chief. “It will also help ensure that the many people who work at Vertex will continue to work in Massachusetts for many years to come and will be joined by many hundreds of new colleagues.’’
The offer from Massachusetts comes on the heels of the debacle with Evergreen Solar Inc., which earlier this month said it is closing a factory in Devens that was built with the help of millions in state incentives, resulting in the layoffs of 800 workers.
Bialecki said Vertex’s incentives would be subject to rigorous clawback provisions: If the firm did not meet its job creation targets, it would forfeit the tax breaks.
Vertex had previously considered moving to Fan Pier, but held off when the recession slowed work on the property. However, the parties continued talking, and closed the deal as other landlords tried to land Vertex. Neither Fallon nor Vertex would disclose its rent in the new buildings, which would be among the first to be built in Boston following the economic downturn.
The buildings will be the second and third major structures at Fan Pier, and would be between the existing 18-story tower at One Marina Park Drive and the John Joseph Moakley United States Courthouse. Fan Pier has been in the making for some 30 years, with several previous owners unable to get it underway. Even today the site is mostly covered by parking lots.
“When a company occupies 1 million square feet in one location, it’s an immediate game-changer,’’ Fallon, the chief executive of the Fallon Co., said yesterday. “There is no question we will see more demand for retail stores and residences in this area.’’
The relocation will allow Vertex to consolidate its 1,300 workers, now divided among 10 buildings across Cambridge, into a single location.
The decision to relocate comes at a critical juncture for the biotech, which has recently hired 300 employees in anticipation of selling telaprevir, a drug it has been developing for 15 years. If it gets a regulatory nod this spring, Vertex will be the first approved, commercially available treatment for hepatitis C, a disease that has become an epidemic among baby boomers who were infected decades ago, either by a blood transfusions or injecting drugs.
The market to treat hepatitis C is expected to be worth billions of dollars annually over the next decade. Vertex is trying to beat out New Jersey-based Merck & Co., which is seeking approval of a similar drug.
Real estate specialists said the firm’s relocation stands to have a huge impact on the future development of the South Boston Waterfront. Until now, the area has lacked a major tenant to give credibility to the city’s effort to transform it into an Innovation District.
“You couldn’t script a better company coming to the waterfront,’’ said Tom Hynes, chief executive of the real estate firm Colliers Meredith & Grew. “One company can really make a huge difference, and this transaction is an example of that.’’
Casey Ross Boston Globe January 26, 2011
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