Two Newton Place in Newton is part of a 5 million-square-foot property portfolio that Boston Capital Institutional Advisors has opted to retain after marketing it for sale.
It was billed as the largest commercial real estate portfolio sale ever pursued in New England, but according to Boston Capital Institutional Advisors principal Karl W. Weller, reports of the deal have been greatly exaggerated.
Although some observers maintain the crumbling market has thwarted BCIA’s intention to sell a 55-building portfolio scattered from Connecticut to Maine, Weller insisted last week that the Boston-based firm never fully committed to disposing of the package. In acknowledging that BCIA has now decided to retain the bulk of the assets, Weller said that the current approach of recapitalizing the portfolio was part of the company’s game plan from the outset.
“That was always the preference,” Weller told Banker & Tradesman last week, with the firm now in the process of wrapping up a series of equity and debt infusions to the portfolio. BCIA has decided to market a handful of the assets separately, but most of the portfolio will remain on the company’s plate for the time being. “We concluded that was a better route than selling it,” said Weller, adding there was no dominant player who stepped in to provide the debt and equity financing for the remaining properties. “It’s a number of different pieces,” he said.
According to Weller, BCIA initially did offer the portfolio up for sale, with an asking price said to be in the $650 million range. Totaling some 5 million square feet, the holdings included such prime office properties as One Winthrop Square and 10 Winthrop Square in Boston, Point West Place (aka 111 Speen St.) in Framingham and Cedar Hill Business Park in Marlborough. Cushman & Wakefield of New England was retained to market the package, and officials there initially said they anticipated a surge of suitors would chase the opportunity.
Weller said the concept of such a large portfolio being offered up for sale may have made it seem that was BCIA’s sole intention. “That’s not the way it should have been portrayed,” he explained, given that the company was simultaneously pursuing the recapitalization strategy and also felt comfortable that it could succeed if no deal were to occur at all.
Uncooperative Market
Although the regional market is having its difficulties and BCIA buildings have seen some softness, Weller said the portfolio overall retains a 90 percent occupancy rate and includes some of the region’s best located and maintained properties. Had an investor ponied up the asking price, BCIA gladly would have sold the properties, said Weller, but he added that, “it ended up pretty much the way I thought it would.”
Weller is particularly familiar with the assets given that most of them were acquired from his former employer, MGI Properties. BCIA purchased the cadre of office, flex and warehouse buildings from MGI when the real estate investment trust took the unusual move of liquidating itself in the late 1990s after determining that the properties were worth more than what the shares were garnering on Wall Street. As director of acquisitions, Weller was involved in purchasing several of the properties for MGI, including buildings in Connecticut, Portland, Maine and Manchester, New Hampshire. The bulk of the portfolio put on the block by BCIA was made up of properties located in Massachusetts.
As Weller acknowledged, many industry observers said they were under the impression BCIA was focused on selling the portfolio, and some claimed last week that the continued collapse of rents and increasing vacancies were likely culprits in having no investor step forward to meet the asking price. “The market wouldn’t cooperate,” said one investment specialist who has been tracking the situation. “It just won’t turn around.”
In any event, Weller said BCIA is “perfectly happy” to retain ownership of the buildings, adding that the company is continuing to pursue additional acquisitions when the opportunities present themselves. The firm is also selling some properties individually, including the recent disposition of a Peabody building for $4.9 million, or a healthy $131 per square foot.
The Peabody property was not included in the larger portfolio, but as mentioned earlier, BCIA has decided to trade select assets from the offering. Trammell Crow Co. has been retained to sell a Franklin warehouse property in Forge Park, for example, while Spaulding & Slye is marketing two buildings in Raynham. Cushman & Wakefield, meanwhile, is listing 326 Ballardvale Ave. in Wilmington to potential investors.
Joe Clements may be reached at jclements@thewarrengroup.com.
