Beacon Capital Partners is known in local commercial real estate circles for being particularly nimble in its dealings, but in the case of a major block of commercial buildings in South Boston, some claim the company is about to outdo itself.
Barely a month after shelling out $40.5 million for a 15-building portfolio along A and Midway streets, Beacon reportedly is considering a flip of the 808,000-square-foot package, with some observers predicting that a sale could garner the firm twice what it paid the Boston Wharf Co. for the properties. Whereas Beacon spent a little over $50 per square foot for the buildings, one source said the Boston-based company is now marketing them for at least $100 per square foot.
“They are trying to sell it for sure,” said the source, who requested anonymity. Spaulding & Slye Colliers has supposedly been retained to peddle the holdings, the source said, although officials at that real estate services firm declined comment on the matter.
For his part, Beacon Chairman Alan J. Leventhal insisted last week that his firm has no such plans to relinquish the properties, countering instead that his company is the one being pursued by the investment community.
“In this type of marketplace which is so active, it’s not unusual to be approached by people who want to acquire property or to co-invest, and this property is no exception,” Leventhal said. Thus far, he added, Beacon has been unwilling to part company with the newest holdings, despite receiving some “aggressive offers.”
“We bought it to develop it, and that’s what we intend to do,” he said.
Another source, a Boston investor active in acquiring properties locally, said he has also heard that the portfolio is on the market. “We’re watching it carefully,” said the source, who declined to comment on whether his firm is pursuing the deal or might consider getting involved at some point.
Leventhal would not discuss any other aspects of the Boston Wharf transaction, including one theory that his firm exhibited the Midas touch there as it has so often in previous deals. Recently, for example, Beacon traded a building in San Francisco for $175 million to Charles Schwab after having purchased it a few months earlier for $33.5 million. Even with a $40 million renovation of the building at 233 Fremont Ave. in the City by the Bay, Beacon achieved a significant windfall for its efforts.
“They are really hot right now,” said the source who claimed Spaulding & Slye has been hired to sell the portfolio. “It’s like they can do no wrong.”
Bargain Price
Given Boston Wharf’s reputation as a savvy real estate firm in its own right, several observers expressed surprise that the firm was willing to give up the properties for $50 per square foot, with one maintaining that at that price, “they gave it away.”
“They left $50 million on the table,” the source said of Boston Wharf. A Boston broker also following the deal agreed, calling it “a bargain price” given the recent explosion of rental rates in the surrounding Fort Point Channel area.
Originally developed by Boston Wharf, the strip of aging brick warehouses had been owned by the firm’s parent company, P&O Properties, since the 1970s, according to Boston Wharf President Robert Kenney. According to Kenney, his company had not intended to sell the buildings until being approached last year by Beacon.
“It made sense at the time,” Kenney said. “It wasn’t on our radar screen in the immediate future.”
Kenney had no comment on the theory that Beacon ultimately got the better of the deal, but he noted that his company remains a major landlord in Fort Point Channel, with two million square feet spread throughout the district. The company this week is delivering another 68,000 square feet of office space to Thomson Financial Services, for example, bringing that tenant’s occupancy in Boston Wharf properties to more than 600,000 square feet. Meanwhile, Boston Wharf is driving piles for a 500-vehicle parking garage off of Congress Street and hopes to sign a 37,000-square-foot tenant this week to complete leasing at 321 Summer St., a former warehouse which has already secured Extraprise to take another 51,000 square feet there.
“We’re still in business,” Kenney said.
So is Beacon Capital, which just closed on Beacon Capital Strategic Partners, a real estate limited partnership that has raised $287 million from a variety of investors, including pension funds, endowments, insurance companies and other institutional players. The funds are the second major round of financing raised since Beacon was launched as a private real estate investment trust in January 1998.
Among its more active – and successful – ventures of late is occurring across the river in Cambridge, where Beacon recently began construction on the first of four buildings at Technology Square. The total 600,000-square-foot expansion will increase space at the property to more than 1.1 million square feet, space that has also appreciated greatly since Beacon purchased the Technology Square complex in mid-1998. Average rents in Cambridge now exceed $50 per square foot, according to Insignia/ESG.
