Posted on 25 Oct 2010
Liberty Mutual Group, one of Boston’s oldest corporate titans, will expand its operations in the Back Bay with a $300 million office tower and 600 additional employees, a sharp reversal of the city’s recent history of losing the headquarters of large employers that once dominated its landscape.
The insurance giant yesterday said it will build the tower on the site of two properties, the former Salvation Army building at the corner of Berkeley Street and Columbus Avenue, and the adjacent Benjamin Franklin Smith building. It acquired those buildings, both near its Berkeley Street headquarters, last year.
The project provides the city with an immediate economic boost at a time when most major real estate projects are stalled. Construction could begin as soon as September and will create 500 building trades jobs, officials said.
“Their decision to expand their presence and grow over 1,000 jobs is great news for the city and the state and another indication that we are on the road to economic recovery,’’ said Governor Deval Patrick.
Said Mayor Thomas M. Menino: “This is a major shot in the arm for Boston’s economy. It shows that Liberty Mutual has confidence in the stability of our city.’’
To help Liberty Mutual, Menino said, the city is providing a $16 million property tax break. In exchange, the mayor said, the new building will net the city $50 million in property taxes over the next 20 years.
The Boston Redevelopment Authority will vote on the proposed tax break next Tuesday. The tax agreement also needs a sign-off from the City Council.
Liberty Mutual spokesman John Cusolito said the company, one of Boston’s largest employers with 2,500 workers downtown, has always regarded the city as its expansion pad. It was founded in Boston in 1912.
“This was important for us to do,’’ said Cusolito. “Many of our senior executives are here. The company’s roots are firmly in Boston.’’
The 600 new jobs will cover a broad array of positions at Liberty, from accounting and actuarial work to human resources.
The decision to grow downtown runs contrary to several high-profile losses of Boston companies, including the acquisition of Gillette Co., by Cincinnati-based Proctor & Gamble Co. and of BankBoston by Fleet Financial Group, which in turn was bought by Charlotte, N.C.-based Bank of America Corp.
Chipmaker Teradyne Inc., also founded in Boston, moved its headquarters to North Reading. And even Fidelity Investments, still one of the city’s largest employers, continues to spread operations to locations outside Boston, sometimes in other states.
It was the emergence of insurance giants such as Liberty Mutual, John Hancock Financial Services, and New England Life in the late 1800s and early 1900s that made the Back Bay a premier business address.
But Hancock was bought by Manulife Financial in 2003, which moved many of the employees out of the signature tower that bears the company’s name, to the South Boston Waterfront. New England Life was bought Metropolitan Life Insurance Co. in the 1990s, though it still remains on Boylston Street.
“The fact that Liberty Mutual could have gone anywhere, and is choosing to stay here, is very bullish for Boston,’’ said Meg Mainzer-Cohen, the president of the Back Bay Association, a business group.
Although the Salvation Army and Benjamin Franklin Smith buildings will be torn down to make way for the new tower, city officials said a third building on the site that houses the restaurant Grille 23 will likely be preserved.
BRA director John Palmieri said Liberty Mutual’s new building will be a medium-size tower about 300 feet tall, roughly 20 to 25 stories, and support 580,000 square feet of office space.
However, the Liberty Mutual spokesman said the company has not decided on the tower’s size and will work with community leaders and city officials to design a building to fit the surrounding area.
Liberty Mutual has grown steadily in recent years and is the nation’s fifth-largest property and casualty insurer. In 2008, it spent $6.2 billion to acquire Safeco Corp., a Seattle insurer.
Standard & Poor’s noted in a recent report that Liberty has a strong position in the US market and appears poised to expand both its home and auto insurance lines. The S&P report noted Liberty Mutual’s earnings are below average compared to peers, but it has not suffered the credit problems of other financial services firms.
Liberty’s expansion plan comes as the city is reviewing building guidelines in the area surrounding the proposed project. Some officials and residents involved in that review said the Menino administration appears to have blessed the project before finishing its review.
“I’m pleased Liberty Mutual wants to expand in the Back Bay, but I’m disappointed it is moving forward before the re-zoning process is complete,’’ said
State Representative Martha Walz, whose district includes the proposed development. “The BRA is putting the cart before the horse.’’
Kairos Shen, the BRA’s chief planner, said the agency intends to complete a thorough review of the proposal.
“There certainly isn’t a presumption that we have an approved project here,’’ he said.
Shen added that a preliminary draft of revised zoning guidelines allow for a building of up to 400 feet tall. In addition to BRA approval, Liberty Mutual also needs permits from multiple state agencies before construction can begin.