CambridgeSide developer takes small step, but more is needed: Analysis of its financials
New England Development is petitioning the city to rezone the CambridgeSide mall area to allow towers that are 82 percent higher than current zoning allows. The majority of total square footage will be devoted to lucrative office and lab space renting at rates more than 400 percent higher than the current retail space. The developer’s key argument for rezoning is to “save the mall” from the impact e-commerce has had on bricks-and-mortar retailers; opponents question whether breaking zoning rules is truly necessary for survival.
While developers typically don’t have to disclose their profits in zoning cases, the developer is in a position in which it must disclose financials to the city – to prove how much upzoning is needed to subsidize the mall and because an offer of increased affordable housing appears to be contract zoning with the city. Understanding the developer’s upside is important to judging if citizens are getting a good deal.
The developer has taken the step of saying it will show city decision-makers its pro forma financials, which should demonstrate projected costs and profits – but will not let the city have a copy of those documents.
With 20 years of experience as a financial analyst in New York, I feel I must say this: No financial analyst could analyze the pro formas without having a copy and a day or so to study them as to truth, fairness and reasonable assumptions.
Before approving a redevelopment that sets a precedent and inflicts many costs on Cambridge’s historic neighborhoods and its residents, particularly at Lechmere’s Canal Park and in East Cambridge, it seems wise and responsible for city government to perform such due diligence.
Governments worldwide require corporations to have their financials audited using national or international accounting standards to protect investors and inform tax collection; it seems reasonable for city governments, when reviewing large scale redevelopments that would break existing zoning regulations, to also require a professional audit.
If the developer is in good faith about needing 155-foot heights to survive, it should be willing to allow the City Council and professional financial analysts to study a copy – perhaps after signing confidentiality agreements. If the developer’s business partners, creditors and the like have agreements that the pro formas remain confidential, those parties can give permission for disclosure in this specific instance.
The City Council must demand those financials, then release the conclusions of an analysis to the citizens of Cambridge, telling us whether it’s really necessary to build 82 percent higher for the mall to survive.
Marlene Lundberg, East Cambridge
Marlene Lundberg is a retired corporate credit analyst with 20 years of experience in financial analysis in New York City – three at Value Line Investment Survey and 17 years at the National Association of Insurance Commissioners, an organization for state government insurance regulators.