I wanted to provide some background on one of the recent developments in the Westwood Station project. Before doing so, it's important to note that the economic climate surrounding the project has changed dramatically in the last few months. For us at CC&F, the debate between economists as to whether or not we have entered a recession, is an academic discussion. The financing markets have turned downward dramatically and lending conditions are very challenging. We are very fortunate in that our joint venture partner, Commonfund, is very strong financially and able to provide the project with substantial equity investment. We are also fortunate that our retail partner, Steve Karp of New England Development, have recruited many strong, high quality national retailers to the project. Nothwithstanding those strengths, the project still requires a considerable amount of construction financing and construction lenders have uniformly become more conservative, tightening both lending conditions and financing terms. The harsh markets have already caused the indefinite delay of several major projects in the region including North Point (Cambridge), Southfield (the redevelopment of Weymouth Naval Station), Columbus Center (Boston), and much of Fan Pier (only the office portion is proceeding).

Westwood Station's commitment to condominium development and sales of the residences remains unchanged. Otis & Ahearn is the broker/marketing agent and plans are underway for construction of an on-site marketing and sales office. All units are still to be designed and constructed to facilitate sale as condominiums. Condominium sales generate greater profits for the development than rentals (and so, of course, we strongly prefer to sell all units) but, given current market conditions, lenders will not provide financing on units that are exclusively restricted to condominium sale. The prior terms of the draft Development Agreement provided constraints on rental terms that lenders now will simply not accept in their financing. For example, one prior condition provided that no resident could renew any lease after two years (thereby forcing eviction of that individual). The intent was to provide us, the developer, with a further incentive to convert rentals to condos as rapidly as possible by making it more challenging to keep the units rented.

We are optimistic that Westwood Station will carve out a unique position in the greater Boston residential development market. It's worth noting, however, that virtually all major project financing now involves several national or international lenders, few of whom are based in Boston. A decade or so ago, a strong Boston project might be able to make a special appeal to Bank of Boston, or Bank of New England. Now, the major lending institutions are spread out around the globe and have little special affinity for a particular region. Our optimisim is appreciated, but not bankable, thus the change in rental conditions. Again, this does not change our business objectives. Condo sales remain easily the most preferrable way financially to bring residences to market. It's my belief that the unique mixed-use character and Westwood location of the project will very much do its part to help make this happen. What is less certain is what will happen to the national and regional economy and what impact that will have on condominium sales.

I hope this background is helpful and I am prepared to provide similar information on other aspects of the project or to answer specific questions if that is useful.

Jay Doherty
Cabot, Cabot & Forbes