the approvals it yielded spiked the land value up to $4.5 million.
To raise the money for the hotel and retail projects, Sykes, 46, and Welch solicited Bank Boston Development Corp., which later merged with Fleet Bank, to join the project as an early stage equity partner. For a 45% interest in the project, Bank Boston threw in $4.5 million toward the entire development deal. But a year into the project, the Fleet merger shifted its investment goals, which left the developers without an equity partner. To make matters worse, Sykes and Welch still owed Fleet $2 million of the money they had already spent. The two men were able to negotiate a deal in which Fleet allowed the developers to resell their stake to another development group, Corcoran Jennison Co. Still, Sykes says, more money was needed, and the greatest challenge was negotiating a new equity investment deal that allowed the project to proceed while still under the majority ownership of the African American-lead development team.
Since the project fell into the category of economic development, the city granted Sykes and Welch $17 million in grants and loans from its Economic Development Initiative. The Boston Empowerment Zone sold another $43 million in bonds to securities firm RBC Dain Rauscher.
Additionally, Sykes and Welch each sacrificed more than $100,000 of their own money as they’d both been successful real estate developers during their careers. “I describe this as sort of the Spike Lee She’s Gotta Have It approach to development,” Sykes quips. “Get some credit cards, a good idea, some creativity, and the ability to bring value to a piece of land that was undervalued. That’s what we did. Then we were able to trade the value that we created in the site for bringing more capital into the deal.” Sykes clearly didn’t depend on credit cards. Rather, it was his creativity and resourcefulness that carried him through.
The 60-employee hotel and the 200-employee retail and garage space opened in July during the first phase of Boston’s Crosstown Center development project, a city initiative to vitalize the underserved Roxbury community. Sykes and Welch have been approved to build another 280,000 square feet of office space, 30,000 square feet of retail space, and an additional 600-car garage to add value and employment to the Roxbury community. The total costs amount to $140 million, and the partners project that in 2005 the hotel alone will earn a $7 million return on investment.
“I want to have hotels that make sense, and I’m specifically interested in urban areas,” says Sykes, who is also president of New Boston Urban Strategies America Fund, an urban development fund that provides equity for economic development in the Mid-Atlantic states.
“I’m interested in economic development, meaning development that brings value to an area in the form of jobs, transforming communities, and in terms of retaining the black middle class,” says Sykes. “To the degree that I can find those opportunities, I can see having more hotel properties.”
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