There may be trouble beyond the horizon, but the investment sales home front has not yet swayed in Massachusetts, or so it would seem from a continued surge of multifamily activity. While skyrocketing fuel prices and the Hurricane Katrina disaster had the country’s economy again teetering last week after a period of growth, industry observers say real estate investors continue to flock after deals bearing a residential component.
“There’s still way more money than there is product,” said Cushman & Wakefield of Massachusetts President Robert E. Griffin Jr., whose firm is peddling several such opportunities, ranging from development sites up through luxury residential buildings being pursued for conversion to condominiums. In between, Griffin’s firm is also marketing the Village at Quarry Hills in Quincy, a 316-unit apartment complex now under construction a stone’s throw away from downtown Boston and slated to open next spring.
“It’s a pretty incredible project,” said Griffin, whose firm is representing the Texas-based Finger Cos. in the sale. As reported last Thursday on Banker & Tradesman’s Web site, BankerandTradesman.com, a Colorado-based real estate investment trust is said to be buying the Village at Quarry Hills from the Finger Cos. at a price exceeding $105 million. Griffin declined to discuss details of the sale, or identify the suitor, but he acknowledged that the property is under contract to a “top level” buyer, identified by sources as Archstone-Smith, a REIT traded on the New York Stock Exchange
Given its structure as an apartment REIT with nearly 80,000 units nationally under its control, Archstone-Smith will most likely keep the property as rental, most observers agreed, but Griffin said the site was courted by a plethora of investors interested in converting the units to condominiums. Besides the Class A approach of the Finger Cos., which delivers a range of high-end finishes and appliances to the units, Griffin said other draws are dramatic views of the Boston skyline and the opportunity for residents to join the popular golf course. The sprawling Blue Hills Reservation also is located nearby for residents, who by some estimates would be paying a rental rate of more than $2,000 per month to enjoy such amenities. Cushman & Wakefield has brokered some of the area’s largest multifamily sales in recent years, including the $145 million disposition of Museum Towers in Cambridge in 2004 to a condominium converter.
Some familiar with the Quarry Hills project concur that it will offer a rare level of quality for a rental property, with Northeast Apartment Advisors President Thomas Meagher putting it on a par with Archstone-Smith’s own Village at Bear Hill in Waltham as one of the few new locations capable of attaining double-A status, albeit lacking Bear Hill’s proximity to suburban Weston.
“It’s really a bet as to whether the amenities with the golf course [privileges] and the urban barrier Â… will overcome the Quincy address,” said Meagher when informed of the reported deal with Archstone-Smith. Meagher would not comment on the price or the discussions, but did call the Village at Quarry Hills “an extraordinarily attractive site,” joining Griffin in praising the developer’s upscale track record.
Efforts to contact Archstone-Smith and officials at the Finger Cos. were unsuccessful by B&T’s press deadline. Griffin would not provide any estimate on when the sale with Archstone-Smith would be completed, but some sources said they believe the deal will proceed apace. From some accounts, there would be plenty of takers to step in should the current negotiations falter. “It was an absolute war,” said one source familiar with the bid negotiations.
‘Interesting’ Future
Although it may not have the cache of certain markets, the South Shore and Quincy have seemingly attracted plenty of residential attention recently, with such firms as Congress Group Ventures and Intercontinental Real Estate Corp. of Brighton under way with new apartment communities in Quincy. Meanwhile, condominium conversions are occurring throughout the city, joining a wave of such activity being seen throughout the region.
As for the developing crisis over the gasoline price hikes and the hurricane, Griffin and others agreed it ultimately could become unsettling for real estate investors if the economy comes to a halt or energy costs skew income projections. “It could have a very deleterious effect,” said CBRE/Whittier Partners principal Gary J. Lemire, whose investment sales team has had a successful year to date peddling properties throughout New England. Lemire, who has completed sales in New Hampshire and Massachusetts this year, said his firm is projecting building energy costs will jump another 9 percent this year following a 13 percent increase in 2004. “It bears watching,” Lemire advised, while adding that the short week before Labor Day showed no sign of buyers backsliding.
Indeed, the relative stability of real estate that has prompted investors to consider real estate may become even more pronounced if the economy does struggles, one broker claimed, although another trump card yet to be laid out is in the future direction of interest rates. “There’s a lot up in the air for sure,” said one investment sales specialist, adding the remainder of the year should prove “interesting, to say the least.”
