Several buildings in Boston’s Back Bay area have recently enjoyed notable leasing activity, including 501 Boylston St.
In an effort that could provide a measure of corporate stability for merger-weary Boston, industry sources claim that Liberty Mutual Insurance Co. is negotiating to acquire 10 St. James Ave., a 20-story, 5-year-old office building located adjacent to the firm’s longtime headquarters in the Hub’s Back Bay. Sales estimates were not available, but owner Millennium Partners had been seeking to trade the 570,000-square-foot property for more than $500 million.
The reported discussions between Millennium and Liberty Mutual come at a time when Boston’s commercial real estate investment market is at a fever pitch, with several prominent buildings in the region on the market for sale. Across town in the Financial District, a bevy of high-profile players is competing for Ten/10 Post Office Square, a 13-story, 440,000-square-foot building, sources said. Acquired by Walton Street Capital five years ago for $105 million, Ten/10 Post Office Square is being marketed at a price in the $300-per-square-foot range, according to sources, or about $120 million. Officials at Cushman & Wakefield, which is brokering the high-profile sale, declined comment on the status of that transaction.
On the 10 St. James Ave. situation, Millennium Partners and New York-based Eastdil Realty officials did not return phone calls by Banker & Tradesman’s press deadline, while Liberty Mutual also did not respond to inquiries. Nonetheless, several industry sources said they had been told negotiations between the two sides are ongoing. One source insisted that a preliminary deal has been struck, although that rumor could not be seconded. Ten St. James Ave. had been pulled off the sales block this summer after investors wavered at the ambitious sticker price.
Not only might a user be more inclined to reach the seller’s financial expectations, one broker familiar with Liberty Mutual maintained it would be a “smart move” for the firm on several fronts, including the opportunity to manage growth. “They would be a very likely buyer,” said the source, especially given that Liberty Mutual already occupies an estimated 100,000 square feet in 10 St. James Ave., and last year completed the purchase of two nearby buildings to further accommodate its local space requirements. The centerpiece of that expansion was 330 Stuart St., which is close to Liberty Mutual’s headquarters at 175 Berkeley St. Liberty Mutual outbid several suitors for that asset, best known as the home of the Grill 23 restaurant.
Given that the Back Bay is suddenly on the rebound, the possibility of fewer options to lease space in the future could further instigate the purchase of 10 St. James Ave., one broker offered. According to third-quarter figures compiled by Trammell Crow Co., the Back Bay has a current vacancy rate of 8.4 percent and net absorption for the year of 183,000 square feet, impressive given the submarket’s difficulties during the recession. Although there is still a good level of sublease space in the Back Bay, and properties such as 131 Dartmouth St. and Copley Place sport large availabilities as well, the Back Bay has been brisk in recent months in completing deals, with the John Hancock Tower, 501 Boylston St. and 101 Huntington Ave. all scoring significant leases of late. Investors Bank & Trust alone committed to more than 500,000 square feet on a long-term basis in two Back Bay buildings, including its longtime home at the John Hancock Tower.
Were Liberty Mutual to acquire 10 St. James Ave., it would be a boost for the city after recent news of departures such as Wolters Kluwer from downtown to Waltham and the Teradyne Corp. announcement that it will leave the city for North Reading, taking about 1,000 jobs with the relocation. Liberty Mutual, on the other hand, has made a statement through its recent purchases, according to one source, who added that buying 10 St. James Ave. would be “the icing on the cake” for creating a critical mass in the city going forward. “I hope it happens,” said the source.
Continuing a trend seen for several years, 2005 has been an active one on the investment front for the Back Bay, headlined by the $55 million sale this summer of 399 Boylston St. to a Connecticut investor. Several other prominent office and retail buildings are also being marketed for sale, and brokers for those properties indicated much of the product will change hands by year’s end. As for Ten/10 Post Office Square, it appears that a finalist has yet to be selected, although one source familiar with the discussions said that an agreement could be in place as early as this week. Chicago-based Walton Street Capital earlier this year sold its 99 High St. office tower nearby and also previously owned One Boston Place, which was acquired by TIAA-CREF for more than $265 million.
