According to some industry watchers, Bay Colony Corporate Center owner Shorenstein Co. could reap as much as $250 million for the sprawling Waltham office complex, which contains nearly 1 million square feet of space in four buildings.
In what could result in one of the largest suburban real estate deals in recent memory, Bay Colony Corporate Center in Waltham is being put up for sale by its San Francisco-based owner, with Shorenstein Co. and its institutional partner hiring Cushman & Wakefield of Massachusetts to sell the four-building complex. By some estimates, the owners hope to reap more than $250 million in the deal, which includes just under 1 million square feet of Class A office space.
“It is great real estate,” Cushman & Wakefield principal Edward C. Maher Jr. told Banker & Tradesman last week, with the veteran investment sales specialist further describing Bay Colony as “the yardstick against which all other suburban assets are measured.”
Maher and other members of Cushman & Wakefield’s Financial Services Group began marketing Bay Colony last week, with others handling the sale including Cushman & Wakefield of Massachusetts President Robert E. Griffin Jr. and principal Marci Griffith Loeber. Although it is expected that institutional funds will pursue the property aggressively, Loeber said the firm is not limiting its search to just those investors. “Like any property these days, its very hard to predict who the ultimate buyer will be,” she said. “Everybody has money right now.”
Maher cited a number of reasons why Shorenstein and the Ohio State Teachers Retirement System opted to put Bay Colony up for sale. Besides the unprecedented flood of capital chasing commercial real estate this year, particularly pedigree assets, Maher noted that the partnership has owned the complex for nearly 10 years, fitting into the natural harvesting cycle.
“It’s just a good time for them to do it,” said Maher, adding he does not believe the disposition is a signal that Shorenstein is abandoning the Massachusetts real estate market. “They have bid on a few of the larger properties we have [been marketing], and they are out looking for other opportunities,” Maher said.
There is no set asking price for the property, said Loeber, who nonetheless acknowledged that a rumored target of about $265 per square foot is relatively close. The sellers’ “expectations are clearly in that range,” she said, a rate which would place the price at just over $260 million.
Suburban Space
Located on a 58-acre parcel overlooking Route 128, Bay Colony Corporate Center features 3,000 parking spaces and a variety of on-site amenities in the well-maintained buildings. Originally assembled by Bay Colony Development, a spinoff from Cabot, Cabot & Forbes, the park was sold to London & Leeds upon the construction of the first two properties. After London & Leeds developed the third building, Shorenstein acquired the park in 1995 and proceeded to complete the park’s build out with construction of the fourth structure.
Bay Colony’s 950 Winter St. has 256,000 square feet of space, 1000 Winter St. has 279,000 square feet, while the smallest building is 1050 Winter St., which totals 155,000 square feet. The final asset, 1100 Winter St., contains the most space with 281,000 square feet. As with Maher, leasing agent Rick Fahey offered nothing but praise for Bay Colony, which Maher estimated is about 91 percent occupied.
“It is absolutely one of the greatest suburban office parks in the country – no question about it,” said Fahey, a principal with Trammell Crow Co. who has been handling lease deals there for 15 years. Along with substantial conference space, Bay Colony offers tenants on-site child care, various eating options including cafes in each building and a Fitcorp-run fitness facility at 1000 Winter St.
While most observers concur that Bay Colony is among the region’s premier office parks, some questioned whether depressed suburban rental rates and a glut of vacant space throughout the area will support such a high price tag. “I do think it will sell, but I don’t know if they are going to get $265 a square foot,” opined one local investment specialist familiar with the property. The broker estimated that the new owners would need to achieve rental rates in the low- to mid-$30 price range per square foot to make the deal work, and maintained it would be hard for the Waltham market to support that rate. According to Spaulding & Slye Colliers, the average asking rate in the Route 128/Massachusetts Turnpike market where Bay Colony is located was $22.28 per square foot at the end of the third quarter, while the average suburban asking rent is $19 per square foot.
Maher did not address the rental situation, but said he is encouraged by the initial response from investors. “Based on what we’ve seen so far, it’s being very well received,” he said. With the program just being launched, however, Maher said it is doubtful the deal will be completed by year’s end, even though a buyer could be identified by that point.
Although the Bay Colony transaction may not make it onto Cushman & Wakefield’s roster for 2004, the local investment sales team continues to enjoy a record year with its existing sales volume of commercial real estate assets, which Loeber estimated to be $1.9 billion as of last week. With several other deals expected to close over the near term, the firm is virtually guaranteed to hit the $2 billion mark for the year. “Those are New York-type numbers for a Boston-based sales group,” said Loeber. Among its cadre of 2004 deals, the firm has brokered the sale of One Beacon St. in Boston for $340 million, the Museum Towers apartment complex in Cambridge for $145 million and two Woburn office buildings that fetched $81 million.
