Jamestown Advisors reportedly will pay a hefty $350 per square foot to acquire the One Federal St. office building in Boston.
Signaling continued interest in Boston’s office tower market, an Atlanta-based investment advisor and a Chicago opportunity fund are moving ahead with a pair of major deals in the Hub’s Financial District. According to industry sources, Jamestown Advisors is acquiring One Federal St. from Clarion Partners, while Walton Street Capital is looking to grab a stake in 99 High St. from Boston Capital Institutional Advisors.
The latter situation is especially unusual in that the 32-story building was purchased barely a year ago by Boston Capital. In what was considered one of the more savvy deals of 2000, the company purchased 99 High St. for $168.5 million, or about $230 per square foot. If Walton Street buys the tower outright, sources said they believe the property will sell for more than $300 per square foot, or about $220 million.
One Federal St. is expected to fetch an even higher figure, with one source estimating the deal in the $350 per-square-foot range. With 1.1 million square feet packed into the 38-story structure, that would put the sale price at a substantial $385 million, easily making it one of the top commercial real estate transfers of the past few years.
Calls to Jamestown principal Fred Van Wagenen were not returned by Banker & Tradesman’s press deadline, while Clarion Partners Vice President Jane Williams would not discuss the matter. “There’s really nothing that we’re going to say about the sale right now,” Williams told B&T. Trammell Crow principal Robert E. Griffin Jr., whose firm is brokering the sale, did acknowledge a deal is in the works, but offered little additional information.
“One Federal St. is off the market, but I cannot confirm who has it,” said Griffin, head of Trammell Crow’s Investment Services Group.
Nonetheless, several sources pointed to Jamestown as the suitor, with one investment broker insisting “they absolutely are the ones who have it.” The status of the deal is unclear, but the investment broker said the property is under contract and efforts are underway to close on the sale. One Federal St. reportedly attracted a slew of potential buyers, with J.P. Morgan said to be among the also-rans. According to one broker, Jamestown made a “preemptive bid” on the building in order to tie up the asset.
Aggressive Money
Given the lack of discourse surrounding the sale, it is unclear whether Jamestown will be employing a financing program to purchase One Federal St. similar to the one used in the 1998 acquisition of Boston’s 125 High St. In that transaction, Jamestown raised the $374 million to buy a 76 percent stake in the complex via a German syndication fund. Jamestown relied on thousands of small investors who ponied up between $25,000 and $50,000 to buy the twin-tower, 1.4 million-square-foot property.
Despite the success of that vehicle, syndication funds to buy United States real estate had a difficult 2000, with many investors moving to the German stock market and others pulling back due to continued weakness of the euro up against the dollar. Some investment advisors who have previously used German money to buy Boston buildings have shifted to domestic capital of late.
The purchase of 99 High St. also had a foreign element to it, with Boston Capital using Middle Eastern monies to finance the deal. The building was originally developed by a partnership including the British-based P&O Properties, but Walton Street typically relies on domestic funding for its purchases.
As with One Federal St., principals on either side of the 99 High St. deal are keeping mum, although one source close to the deal said it is uncertain whether Walton Street will ultimately acquire the building, at least outright. According to the source, Boston Capital could simply refinance the property or bring in a joint venture partner.
“It’s really still up in the air,” said the source. “Right now, [the parties involved] are trying to get a handle on what they want to do with it.”
According to one investment broker, Walton Street actually approached Boston Capital in hopes of buying the 30-year-old tower. The building underwent a major overhaul in the 1990s and is considered a prime beneficiary of the pending depression of the Central Artery, which abuts 99 High St.’s eastern flank.
Walton Street certainly has taken steps to become a major player in the Hub during the past year. After a $192 million joint venture with Blackstone Real Estate Advisors gave Walton Street control of One Boston Place last summer, the firm paid $107 million for 10/Ten Post Office Square a few months later. Both buildings are within close proximity to 99 High St.
“They must have some pretty aggressive money looking for a home,” said one Boston broker who has been following Walton Street’s foray into Boston. “They seem to be everywhere right now.”
Whatever the situation, 2001 already appears to be holding its own in Class A building sales when compared to the past 12 months, a stretch which many have called “the year of the tower.” Along with 99 High St., other local towers which changed hands last year included 265 Franklin St., 53 and 75 State St. and 99 Summer St.
