Beacon Capital Partners reportedly will pay slightly more than $77 million to purchase the 14-story office tower at 116 Huntington Ave. in Boston.
Shining its investment spotlight once again on Boston’s Back Bay, Beacon Capital Partners has reportedly agreed to buy 116 Huntington Ave., a 14-story office tower located between the Copley Place Mall and the Hub’s sprawling Prudential Center mixed-use complex. Sources placed the sales price at just over $77 million, which would be a substantial jump above the $68 million that current owner New Boston Fund Inc. paid for the building less than two years ago.
“It’s a landmark deal for Boston,” opined one source familiar with the transaction, noting that the sale involves two major Hub real estate players and one of the Back Bay’s most ornate office properties. Designed by Boston-based CBT Architects, 116 Huntington Ave. preceded a series of new structures developed along the thoroughfare during the past decade that have enhanced the street’s prominence between the Back Bay and Boston’s Fenway neighborhood.
Beacon spokesman Alex McCallum declined comment on the Huntington Avenue deal when contacted last Friday, while New Boston Fund officials did not respond to inquiries by press deadline. Beacon already owns such major Back Bay assets as the John Hancock Tower, 200 Berkeley St. and 501 Boylston St. Sources said they believe the latest purchase will be made as part of the firm’s third investment vehicle, a commingled fund which just closed in June and has a whopping $1 billion ready to place in various commercial real estate assets.
According to Beacon’s own description on its corporate Web site, Fund III has a “value-added strategy” with a primary focus on office properties located in such target markets as Boston, New York City, Los Angeles, San Francisco, Denver, Chicago and Washington., D.C. The firm earlier this year acquired a 1.1 million-square-foot property in Chicago for nearly $200 million, and last week announced it would purchase a 41-story office tower in Seattle for an undisclosed price.
Trammell Crow Co. principal James F. McCaffrey, whose firm is marketing 116 Huntington Ave., would not comment on the status of the negotiations, but sources insisted that Beacon has committed to buying the property. “I know its happening,” claimed one source. If the deal is completed, it would be the second time in a row that Trammell Crow has traded the building, with the firm also handling the sale to New Boston Fund by American Tower Corp. in late 2002.
Close Clarion Call
Encumbered by a ground lease, a provision that can keep some investors such as institutional capital on the sidelines, 116 Huntington Ave. has nonetheless changed hands several times since coming on line in 1991 in the midst of one of Boston’s worst recessions ever. Originally developed by JMB Urban, the building was sold in 1994 to IDX Corp. for $23 million, followed by a $55 million sale to American Tower Corp. in 1999. That firm paid an estimated $208 per square foot, while New Boston Fund paid about $256 per square foot. The $77 million figure would equate to $290 per square foot.
Both American Tower and IDX remain as tenants in 116 Huntington Ave., which had a 94 percent occupancy rate when purchased by New Boston Fund. It is unclear what the current vacancy rate is, but the Back Bay itself had a 7.6 percent vacancy rate at mid-year, according to Spaulding & Slye Colliers, despite negative absorption of more than 200,000 square feet in the market during the first six months.
New Boston Fund initially placed 116 Huntington Ave. on the market earlier this year, and was reportedly close to striking a deal with ING/Clarion Inc. at one point. McCaffrey would not comment on that situation, but sources maintained that the two firms had been deep in negotiations before the process was halted within the past few months.
In any event, sources said it appears the Beacon Capital sale is on more solid ground and is expected to occur over the near term. Neither McCallum nor McCaffrey would divulge what plans Beacon has for the asset, although one source claimed the firm might entertain a conversion to residential. While others strongly downplayed that concept, the source said Beacon could accommodate many of 116 Huntington Ave.’s tenants in its other properties, and predicted the structure would adapt nicely to such a use.
“I think that would be a slam dunk,” said the source, who has experience in the multi-family market. “It would be perfect for residential.”
Whatever the strategy, it does appear that Beacon is moving ahead to buy the property, one of several buildings that the New Boston Fund owns in Boston and throughout Massachusetts. Founded in 1993, New Boston Fund today manages more than $450 million of equity capital and has a real estate portfolio valued at more than $1.2 billion. The firm has expanded in recent years into such markets as Maryland, Illinois, Ohio, Pennsylvania and Virginia.
The pending sale of 116 Huntington Ave. is just the latest in a busy investment season for Massachusetts, with the Bay State seeing a variety of properties being traded in recent months. Firms such as Trammell Crow, Spaulding & Slye Colliers and Meredith & Grew have brokered deals at a breakneck pace for much of the year, while the remaining quarter shows no signs of slowing down in what is normally the busiest stretch annually for commercial real estate sales.
