Owner wants to add height to South End office building for apartment conversion plan

A South End landlord is seeking to convert a six-story office building into 91 apartments, but only if city officials allow the owner to add height to accommodate the renovations.

The request was made in a proposal recently submitted to the Boston Planning & Development Agency by CIM Group, the Los Angeles-headquartered commercial real estate firm, for the property it owns at 95 Berkeley St., just south of corridor Mass. Pike.

The request to construct an existing building marks a first for Downtown Boston’s Office-to-Residential Pilot Program – the initiative spearheaded by Mayor Michelle Wu that offers tax breaks to property owners who convert workspace into housing.

“CIM Group intends to convert the entire building outside of the ground floor into residential rental units,” the company wrote in its application, obtained by Boston.com.

“For the proposed deal to work, CIM Group would need at least approximately 20,000 additional square feet (gross floor area) to add to the existing structure. We estimate that this would create 20 additional rental homes.

According to CIM Group, the building’s 107,128 square foot underground parking garage containing 36 spaces would remain and be made available for residents to rent.

The project, if approved, would be the second largest of those included in the conversion program after the BPDA approved the creation of 95 apartments in three adjacent office buildings at 85 Devonshire St. and 258 and 262 Washington St. earlier this month.

The 91 units on Berkeley Street would include a mix of 26 studio and 41 one-bedroom apartments, 17 two-bedroom apartments and seven three-bedroom apartments, with rents starting at $3,800, the filing says. Twenty percent of the housing would be made affordable under the city’s inclusionary zoning policies.

Currently, MASS Design Group, an architecture and design firm, occupies part of the ground floor and will remain there after the conversion, according to CIM Group.

An additional 6,000 square feet at street level could either be leased to a retailer or transformed into space for resident amenities, the company wrote.

The conversion is estimated to cost about $75 million — a figure indicative of “hard and soft costs, landlord contingencies, retail tenant improvement allowances and other costs,” the CIM Group wrote in the request.

“We are seeking to finance this project through a combination of equity, debt, and city/state/federal grants or grants,” the company wrote. “Traditional funding sources would likely be too expensive to use for this conversion and so we would seek other lower-cost sources of federal debt.” We plan to finance this with up to 65% debt.

CIM Group began investing in Boston real estate in 2016 and was also behind the 365-unit apartment building known as Idyl, located at 60 Kilmarnock St. in Fenway.

The company has more than $30 billion in assets that it owns and operates across its portfolio, according to the application.

“Through its investments in Boston, CIM knows the city, the BPDA, very well and has developed strong relationships with local industrial players,” the filing states.

As part of the office conversion program, city officials hope to bring some excitement back to downtown Boston, as the COVID-19 pandemic led to a massive shift to remote work that emptied offices in the city and reduced foot traffic over the past four years.

Under the conversion program, developers enter into PILOT (payment in lieu of taxes) agreements and will be subject to a fee of 2% of gross proceeds if the property is sold, according to the BPDA.

Developers stand to receive an average 75% reduction in property tax rates for up to 29 years under the PILOT agreements, officials said.

So far, two conversions have received BPDA approval since the program began last fall. BPDA officials said the agency’s initial hope was to create 200 to 300 new housing units and that, as of late February, it was on track to at least reach, if not exceed, that number. Applications are accepted until June.