The sale of the 612,000-square-foot North Andover Mills property, being handled by Trammell Crow Co., is one of a number of high-profile area transactions straddling the line between 2004 and 2005.
Even with the extra day, 2004 was apparently not long enough when it came to commercial real estate investment sales, with an unusual number of deals carrying over into the new year.
From such trophy properties as Riverfront Office Park in Cambridge and Bay Colony Corporate Center in Waltham to smaller buildings throughout the Boston and suburban markets, dozens of assets from 2004 remain in limbo as brokers try to iron out final details or keep negotiations from stalling. Not only are existing deals taking longer to complete, the continued flood of capital chasing commercial real estate has lured a growing number of owners off the sidelines in recent months.
“It was a little unusual to see so many properties come to the market in the fourth quarter,” acknowledged Trammell Crow Co. principal James F. McCaffrey. “People are trying to take advantage of the situation.”
Trammell Crow, for example, was tabbed in October to market a multi-building complex in North Andover, whereas Holliday Fenoglio Fowler won a late-season competition to sell Boston’s 200 State St. office tower on behalf of Sullivan Properties. Cushman & Wakefield of Massachusetts also scored a new assignment recently when Beacon Capital Partners retained the firm in December to trade a portion of its Channel Center mixed-use complex in South Boston. That effort is just now getting under way, according to Cushman officials.
According to McCaffrey, even more assets are expected to hit the streets in the coming months. “A lot of owners are still combing through their portfolios trying to decide what they are going to do,” he said, adding, “based on what we are seeing, we think we are going to be busier than ever.”
If that is the case, Trammell’s investment professionals should be prepared for a hectic start to 2005 given the active campaign the group has just completed. Even with several deals extending into the new year, Trammell Crow managed to trade more than 20 properties last year, including the 14-story 116 Huntington Ave. acquired by Beacon Capital Partners in December for $77 million. While final figures have not been tallied, McCaffrey said he expects Trammell Crow will have brokered the sale of between $500 million and $600 million worth of real estate in 2004.
Along with 116 Huntington Ave., Trammell Crow brokered the disposition of Centennial Drive in Peabody and Lexington Technology Park in Lexington last year, as well as the blockbuster user sale of the former Lucent Technologies campus in Marlborough to Boston Scientific for $43 million. In downtown Boston, Trammell Crow handled the $17.3 million sale of 711 Atlantic Ave. on behalf of Paradigm Properties and Westbrook Partners.
In reviewing the past year, McCaffrey said virtually every property type enjoyed investor interest, adding that he believes the region will see a similarly broad inventory attract attention in the coming months. Capital will be equally diverse, he predicted, ranging from private opportunity money and pension funds to real estate investment trusts and foreign sources.
Potential Roadblocks
As for its list of overhang sales from 2004, Trammell Crow is still brokering an office park in Tewksbury and another asset in Westborough, along with the 612,000-square-foot North Andover Mills property. McCaffrey said he believes those transactions will be successfully completed over the near term. One property the firm was hired to sell last year will apparently not be available again, with Taurus Investments and Invesco Real Estate Advisors opting to pull 160 Federal St. in Boston off the market late in the year after a brief dalliance with investors.
The sale of Boston’s One Lincoln St. for an astounding $705 million will rank as the most significant sale of 2004, but both Cambridge’s Riverfront Office Park and Waltham’s Bay Colony Corporate Center would have been among the top transactions of the year had they been completed in time, particularly with Bay Colony likely to strike a record price per square foot for suburban Boston office parks. Instead, the RREEF Funds’ pending purchase of Riverfront for an estimated $177 million and Bay Colony’s acquisition by Beacon Capital Partners for $275 million will be registered as 2005 sales if they are consummated later this quarter, as anticipated.
Given the running start seen for 2005, it does appear that the investment market could again rival the velocity seen in Massachusetts last year, although industry observers note there are several variables that could affect the result. A sharp jump in interest rates is seen as among the greatest threats, although lingering concerns that such a trend would occur have not been fulfilled to date. The office sector, meanwhile, has endured on the investment side despite weak fundamentals such as high vacancy rates and falling rents, but some maintain that ardor could be impacted should the economy continue to struggle.
Also expected to be well represented on the trading block in 2005 will be retail, multifamily and industrial properties, according to industry observers, while a few hotel deals crept into the mix in 2004 and that sector is seen as a potential target by investors in the coming months.
Joe Clements may be reached at jclements@thewarrengroup.com.
