The view from $10m up
What the ultra-luxury invasion of Downtown Crossing means for Boston
Research assistance by Michael Malpiede
BOSTON’S DOWNTOWN CROSSING has always been a crossroads, a place where subways, streets, and people from all walks of life intersect. Foot traffic tended to be heaviest during the day, with the area emptying out at night after the stores shut down. But that’s starting to change. Emerson College and Suffolk University have helped breathe new life into the area. And one of the most unusual demographic shifts in the history of Boston—the movement of super-wealthy people into the downtown core—is transforming the area into something resembling a neighborhood.
This isn’t Back Bay or Beacon Hill, where Boston’s understated wealth has traditionally been on display. This is Downtown Crossing, a place that for years has been rough around the edges. But now millionaires and billionaires from around the world are moving in, taking up residence in ultra-luxury buildings and slowly transforming what has been a retail backwater. Larry DiCara, the development lawyer and former Boston city councilor, says many cities across the country are experiencing an influx of wealthy people. But he is amazed that it’s happening in Boston at Downtown Crossing. “This is beyond anything anyone would have imagined,” he says.
No one has done more to change the neighborhood’s DNA than Millennium Partners, the development firm that has brought four luxury condominium buildings to the area over the last 16 years and is preparing to add a fifth nearby. Millennium opened the two Ritz-Carlton towers in September 2001 at the corner of Avery and Washington Streets. Former Red Sox slugger Manny Ramirez signaled the arrival of downtown luxury living when he paid $5.8 million for a 4,421-square-foot penthouse on the 37th floor, with spectacular views of the Public Garden, the Charles River, and the Back Bay.
“We sold that building out in 16 months,” says Richard Baumert, one of the partners at Millennium Partners. “At the time, it was the fastest-selling project in the history of the city. It was a validation that A, there’s a market here, and B, there’s a strong demand for this kind of product.”
The success of Millennium Place made the decision to build the 60-story, 442-unit Millennium Tower up the street at the heart of Downtown Crossing fairly easy. Baumert says $800 million of the tower’s condos sold in 16 months, twice the sales volume of Millennium Place. “And since then,” Baumert says, “we’ve achieved something that no project in the United States outside of New York City has done. We hit a billion dollars in sales.”
The numbers are astonishing for Boston. According to records at the Suffolk County Registry of Deeds, the average sales price of a unit is $2.4 million, with prices ranging from a low of $810,000 for a unit on the 10th floor to a high of $35 million for the 13,256-square-foot grand penthouse, which was sold unfinished to billionaire Texas private equity investor John Grayken.
A lot of people are hailing the tower as a sign of Boston’s emergence as a world class city, and can’t wait for the arrival of other buildings currently on the drawing boards, including another tower planned by Millennium Partners at Winthrop Square featuring retail, office, and condo units. To these people, the high demand for ultra-luxury condominiums is proof that cities are the business and cultural laboratories of the future. The administration of Boston Mayor Marty Walsh believes it can manage the influx of the wealthy in a way that benefits the entire city.
But others are skeptical. There are worries about Boston becoming another San Francisco, a city with a reputation as a place where only the wealthy can afford to live. Many of the wealthy newcomers are from abroad, and some of them view high-priced condos as sound investments and have little interest in becoming part of the fabric of the city.
“What it says is that rich people from all over the world are interested in living in Boston,” says DiCara. “You can say that’s a good thing or you can say it’s a bad thing. Whatever you think, it’s a dramatic change in the demographics of the city.”
IT FILLED A HOLE
Millennium Tower, at 685 feet, is the third-highest building in Boston, behind the Hancock and Prudential office towers in the Back Bay. The views are stunning. To the east is Boston Harbor, glimpsed through the forest of other downtown buildings. To the west are spectacular views of the Back Bay and Charles River.
The tower itself is one of the most visually interesting buildings in the city. Blake Middleton, a partner at Handel Architects in New York City and the lead designer of the tower, says the building pays homage to the Hancock tower without copying it. Instead of the flat, reflective face of the Hancock, Middleton says the Millennium Tower “shimmers in a different way” because it has 13 corners rather than four.
The extra corners give the building a distinctive look on the outside while giving residents more corner views on the inside. “That is probably the most unique feature of the building and it was done to maximize the living experience. People just absolutely love it,” says Baumert.
The penthouse indoor terraces—“they don’t stick out, they stick in,” says Middleton—on floors 57 through 59 are another unique feature. From the ground, they look like holes on each side of the building. But the terraces allow owners to step outside at 570 feet in the air. The great penthouse on the 60th floor has its own, larger uncovered terrace.
Residents on every floor can lever out their windows four inches, which gives them fresh air while creating an ever-changing face on the building.
The inside of the building is broken into three sections. The first nine floors are devoted to a 25-yard long lap pool and hot tub; a massive fitness center, complete with studios for yoga and spin; locker rooms; a children’s play area; an owner’s lounge; a small restaurant area; a library; a 15-seat movie theater; rooms for spa treatments and hair styling; and space for service functions.
The building has two lobbies, one for the residences on floors 10 through 32 and the other for the grand residences and penthouses on floors 34 to 60. There is no 33d floor. Furnishings are high end. The kitchens on the upper floors come with a Sub-Zero wine cooler capable of holding 115 wine bottles, a Sub-Zero side-by-side refrigerator and freezer, a Wolf range and cooktop/microwave, a Millet dishwasher, and lots and lots of marble.
Ron Rakow, the city of Boston’s assessor, says tax bills haven’t gone out to individual owners at Millennium Tower yet, but he estimates the 442 condo units will yield $10 to $11 million in property taxes annually for the city. That’s the equivalent of what Boston collects from 2,889 average Boston condos, Rakow says.
Millennium’s Baumert says only 12 units remain unsold at the tower, but deeds for only 396 sales could be found at the registry. Those deeds indicate the units sold for a total of $935 million. More than half (55 percent) of the owners paid cash for their units, and mortgages represented just a quarter of the overall purchase price.
The influx of wealthy people into the downtown core is accentuating income inequality in Boston. The average income for the highest-earning fifth of households in metro Boston was $272,500 in 2015, which is 18 times higher than the $14,900 average income of the lowest fifth, according to the Metropolitan Area Planning Council. The gap between high and low is increasing, primarily because incomes are rising at the top end. The average income of those in the top fifth has increased 13 percent since 2006, while the average income of those in the lowest fifth declined 1 percent.
Baumert says Millennium Tower has been good for Boston. “Setting aside a hole in the ground that has been removed, look at what’s happened to this downtown area and look at the reinvestment in an area that had fallen on hard times,” he says. “We have a saying that when you put $850 million to a billion dollars into a neighborhood, good things are going to happen. And good things have happened around the neighborhood.”
Sam Tyler, executive director of Boston’s Municipal Research Bureau, a business-funded watchdog group, also sees the arrival of Millennium Tower as a positive sign for the city. “In my mind, it signifies confidence in downtown Boston. I hope it’s a catalyst for other development downtown and not just luxury housing,” he says.
Matthew Kiefer, a real estate attorney at Goulston & Storrs, says Millennium Tower signifies that people from all over the world want to live in the downtown core, that cities are the place where the future is being fashioned.
“It’s a symbol of the new Boston and our emergence as a global city,” he says. “But at the same time there is a veterans facility and a homeless shelter not far from the tower. People are often sleeping in doorways in that area. The tower is a visible sign that cities are becoming very income stratified and it highlights that we have to do something about that.”
Who’s living in the Tower?
Pamela Cushing runs a real estate firm called Live in Luxury, which caters to people looking for super high-end accommodations. Cushing not only talks the luxury-living talk, she walks the walk. She bought a unit at Millennium’s Ritz-Carlton tower in 2005, moved to Millennium Place in 2013, and traded up to Millennium Tower in 2016. She says she will move to Millennium’s Winthrop Square tower when that building opens. Her vice president, Haley Cutter, the mother of two small children, also lives at Millennium Tower.
Cushing says a Millennium building offers more than a beautiful home with a beautiful view. “It’s a lifestyle,” she says, referring to the movie nights and other functions organized for owners. Millennium calls its program La Vie, French for “the life.” It has a similar program for children, called Petite La Vie.
Baumert says Millennium living gives owners what they want most. “They just want more time,” he says. “To be at a facility that allows me to go to the gym, to take a swim, or go to the club, you’re not spending a lot of time in your car. Oh, and by the way, you’re living in the middle of a city where everything is available to you walking out the front door. It enriches your life.”
There’s a Millennium Tower app that lets owners order their car, contact the concierge, or schedule a grocery delivery from Roche Bros. The app lets someone watching a Netflix show in their condo walk down to a treadmill in the fitness center and pick up the show where they left off. Owners can also reach out to Michelin-starred chef Michael Mina and make a reservation for dinner (either in the club area of the building or at Mina’s Pabu Boston restaurant on the ground floor), order takeout, or request one of his recipes. Owners can even make it look like they are doing the cooking by having the makings of a Mina meal delivered with all the prep work done. Just heat and serve.
Baumert says the owners at Millennium Tower are an eclectic group that includes young entrepreneurs barely out of their 20s, empty nesters from the suburbs, college students, and people from the medical, education, and high-tech fields. “These are all people who want a full-service lifestyle,” he says. “I think the building is fairly representative of what this city has become. This city looks very different than it did 15 years ago. It does perhaps have a reputation of being parochial, but now, when I walk around this town, this is a melting pot. This is like any large city around the world.”
That may be so, but many Bostonians, including many walking along Washington Street outside, would probably have no idea what a full-service lifestyle means, or what it would cost. The Boston Globe recently reviewed Mina’s ground-floor restaurant, the chef’s 30th, and came away with a case of sticker shock. The review said a bowl of fish soup cost $59 and a can of beer $18.
Baumert estimates that for 10 percent of the building’s owners their condo is their second or third home. Cushing thinks that number may be higher. She estimates more than 80 percent of the residents live in their home at least part of the time, while about 15 percent made the purchase as an investment. She also confirms that some college students live there, the sons and daughters of wealthy people who see a condo purchase as a way to simultaneously provide housing for their offspring and make an investment. She says the students attend Emerson College, Suffolk University, Northeastern University, and Babson College.
Using data gathered from deeds, the internet, and corporate and other public records, CommonWealth tried to track down the 396 identified condo owners at Millennium Tower. The process is admittedly imperfect, but the research suggests 57 percent of the owners are from the United States, 34 percent from abroad, and the other 9 percent either couldn’t be identified or their identity was hidden behind a trust or limited liability company.
Forty-six percent of the owners are either from Massachusetts or previously owned property here. Twenty-three percent are from China, with Kuwait and Taiwan accounting for 2.8 percent and 2.5 percent of the owners, respectively. Many foreign buyers appear to work through a handful of local middlemen who handle the purchase for them. Millennium also caters to foreigners with websites in Mandarin.
Many owners hail from the business world. Michael Dell, the founder and CEO of Dell Technologies in Round Rock, Texas, owns a $10.9 million penthouse. Tim Steinert, the general counsel for the Alibaba Group in Hong Kong, is listed as the contact for a limited liability company that bought two units. And Claudine Prowse, a vice president of strategy at Inotek Pharmaceuticals in Lexington, owns a $1.6 million unit on the 23d floor. The tower is also home to bankers, surgeons, and an unusually large number of people in the dentistry field.
Six limited liability corporations with ties to two Chinese immigrants purchased a total of 22 units in the building for $22.6 million. The Boston Globe reported in August that the couple, who live in Concord, bought the units on behalf of investors in China. The Globe reported that they came to this country on an EB-5 visa, which is offered to foreigners who invest between $500,000 and $1 million in a US-based business employing at least 10 people. Paula Grenier, a spokeswoman for Homeland Security, said the agency does not comment on EB-5 applicants, their businesses, or their investors.
One sign of the strong demand for ultra-luxury housing downtown is the resale of 21 condos at Millennium Tower in less than a year. The units sold for a total of $6.3 million more than their original purchase price, which works out to an average gain of $301,673 per unit. Five owners put deposits down on their units during the presale and then resold them on the very same day they received their deeds. The biggest gain in percentage terms was the resale of Unit 2011, which was acquired and resold on the same day at a profit of $350,000, a 36 percent gain. Unit 2803 had the largest dollar gain; it was resold six days after the original purchase at a profit of $630,000, or 23 percent.
Cushing bought a unit on the 12th floor of Millennium Tower in July for nearly $1.3 million and then resold it in September for nearly $1.5 million. She then purchased a unit on the 34th floor for nearly $1.4 million.
The real estate agent says Downtown Crossing remains rough around the edges. “Walk up Washington Street, there’s homeless people. They’re still there,” she says with a hint of annoyance. “But Boston is changing, and it’s changing for the better. We’re becoming a world class city. Millennium has single-handedly changed the landscape of the downtown area. There will be more buildings like this.”
Jackson vs Dillon
Tito Jackson looks up at Millennium Tower and sees a problem. Sheila Dillon, Mayor Marty Walsh’s director of neighborhood services, looks up and sees a solution to that problem.
Both are worried about low-income and middle-income residents being priced out of Boston housing. Both are worried about the future of Chinatown. And both say they are worried about Boston becoming another San Francisco. But that’s where the agreement ends.
Jackson, a Roxbury district city councilor challenging Walsh in this fall’s mayoral election, applauds Millennium Partners for filling the hole in the ground at Downtown Crossing and says a tower there is consistent with normal urban planning concepts. But he says the city’s housing priorities are skewed in favor of ultra-luxury housing.
“We’re building too many Millennium Towers,” says Jackson, who points to the next Millennium Partners tower at Winthrop Square. “Fifty percent of the city of Boston’s residents make $35,000 or less, so the housing that is being put up in the city, most of it is not affordable for the people who live in the neighborhoods of Boston.”
In a red-hot real estate market, Jackson says, the city needs to squeeze developers of luxury housing for more money to build affordable housing. “What is the city of Boston going to look like in 10 years if we’re not thoughtful about building workforce housing for folks that can’t afford a $35 million penthouse,” he says.
The Massachusetts Housing Finance Agency, a state authority that helps finance mixed-income rental housing, says the big challenge in the current market is to create housing for middle-income residents. Timothy Sullivan, executive director of the agency, says luxury developers are having no problem financing and selling their buildings, while affordable housing is being built with federal, state, and local subsidies. But he says housing for the broad middle class is very difficult to build.
Dillon, sitting in her office at 25 Court Street, nods her head at all the concerns, but says she’s not troubled by the growth in ultra-luxury housing. “I’m not seeing the big downside,” she says.
First, Dillon says, there aren’t many Millennium Towers being built in the city.
Second, she says, new luxury housing is easing demand for housing elsewhere in the city, putting downward pressure on rents. Her agency’s data indicate more than 12,000 new, high-priced rental units have come onto the market since 2011. Demand is strong for those units, with average rents in central Boston (which includes Downtown Crossing) rising from $3,581 a month in 2015 to $4,488 a month in 2016, a 25 percent increase. Rents in citywide housing built prior to 2011, however, dropped by 4 percent over the same time period, suggesting people are moving into the newer units and leaving behind vacancies in older buildings that are easing the demand crunch.
Third, she says, developers of ultra-luxury housing are breathing new life into the city and either building affordable housing themselves or making millions of dollars in mandated payments to a city fund that is used to finance affordable housing. Since 2014, the city’s fund has collected almost $49 million. Millennium Partners paid $15 million into the fund in conjunction with the tower development.
“For the advocates who say luxury this and luxury that, the luxury units are giving us a ton of cash to create affordable housing throughout the city,” Dillon says.
As for workforce housing, Dillon says she is encouraged by the fact that almost as many permits for housing are being pulled in Boston’s non-core neighborhoods as in the downtown area. She acknowledges someone making $35,000 a year may not be able to afford these units, but says they are affordable for two people who are each making $40,000 a year.
The housing crunch is being driven by a sharp increase in new residents. Boston had 618,000 residents in 2010 and was up to 677,000 last July. By 2030, many are predicting the population could be anywhere from 709,000 to 723,000.
“It is supply and demand to some degree,” Dillon says of the challenge facing Boston. “This isn’t a phenomenon that is just happening here. San Francisco, Seattle, DC, New York, they’re all seeing population increases at a very rapid rate and they’re all having issues with their housing. They don’t have enough of it.”
Tim Reardon, director of data services at the Metropolitan Area Planning Council, raises another concern. He says wealthy people are moving into Boston but not using their units in the same way as other people. “We’re building lots and lots of units, but more and more of them are sitting vacant,” he says. “That’s a sign of foreign speculation.”
Reardon says Census data indicate the supply of units for sale or rent in Boston in 2015 was less than half of what it was in 2010 (5,100 versus 12,000). There have also been big increases in the number of units sold but not yet occupied and units being held for seasonal or occasional use.
It’s unclear how many units in the Millennium Tower are occupied year-round, but it’s a fair bet a significant percentage sit empty for large chunks of time. Grayken, the private equity billionaire who owns the grand penthouse, renounced his US citizenship years ago and became a citizen of Ireland for tax reasons. He can’t live in the United States more than four months a year.
Residents of the tower will be allowed to claim a residential exemption of up to $2,400 on their property taxes later this year if their condo is their primary residence. Down the street at Millennium Place, two of every three residents don’t claim the residential exemption. That may mean they are so wealthy they couldn’t be bothered claiming a $2,400 tax break, or it may mean they don’t live there that much.
Dillon says she hasn’t seen reliable data on units sitting empty, but she hopes that isn’t happening. “We need the folks moving in to get involved,” she says. “We want them to be involved in the neighborhood associations. We want them to open their checkbooks and support local organizations. If folks don’t move in, we lose that. Or if they move in and they just spend time in their unit—and not in their neighborhood—then that’s not going to benefit Boston.”
Dillon says the influx of wealthy residents into Boston doesn’t have to be a negative for the city. In many ways, it is a positive. The newcomers are bringing vitality to the downtown, filling the city’s coffers with money, and spurring economic activity. Grayken and his wife, the owners of the grand penthouse at the Millennium Tower, are only part-time residents, yet they recently donated $25 million to Boston Medical Center for the creation of an addiction treatment center.
Still, it’s worth asking where all this wealth will lead the city, and whether the income inequality for which Boston is known will only get worse. Will Boston be a melting pot of all types of people, or a community of haves and have-nots?“We have to be realists,” Dillon says. “We have to assume that all cities, including Boston, change. The world changes. But we have to be insistent that Boston remains Boston. It’s up to all of us to figure out what the right balance is.”