Brokers at Cushman & Wakefield report that investor interest in Waltham’s Bay Colony Corporate Center, a four-building office complex located along Route 128, has been “overwhelming.” Some industry watchers say the property’s owners hope to reap as much as $250 million in the sale.
To say that investor response for Waltham’s Bay Colony Corporate Center has been encouraging might be an understatement.
“The word I would use is ‘overwhelming,'” offered Cushman & Wakefield of Massachusetts principal Edward C. Maher Jr. in assessing the number – and pedigree – of players submitting bids last week to buy the four-building, Class A office complex that overlooks Route 128. “We have had some great names and some real quality [investors] show interest,” said Maher, whose firm is brokering the sale on behalf of the owners, the San Francisco-based Shorenstein Co. and the Ohio State Teachers Retirement System pension plan.
While Maher and other Cushman & Wakefield officials declined to provide details, industry sources estimated that about a dozen companies submitted final offers last week. Such heavyweights as Tishman Speyer, Hines Interests, Boston Properties and Equity Office Properties were among those making concrete bids, according to sources. Others said to be in pursuit of Bay Colony include Beacon Capital Partners and the RREEF Funds, with the sellers reportedly aiming for a goal of $250 million or more. The lofty sticker price apparently did little to waver investor enthusiasm.
“It’s incredible,” Cushman & Wakefield President Robert E. Griffin Jr. told Banker & Tradesman on Friday. “Even just 24 to 36 months ago, to think we would have generated five bids for a single-asset suburban property of this size would have seemed crazy.” The suitors reportedly included some foreign investors, but neither Maher nor Griffin would confirm those rumors or identify any of the finalists. “We won’t be having to ask for a lot of references,” was all Griffin would say, indicating that most of the bidders are well known and well capitalized. “It’s going to move pretty quickly,” Maher predicted of the selection process, with the possibility of selecting a buyer by year’s end.
‘The Yardstick’
Most of the firms pursuing Bay Colony have been actively seeking real estate opportunities in the region throughout 2004. The RREEF Funds, for example, is already in the process of buying the Riverfront Office Park in Cambridge. That $175 million deal is also being handled by Cushman & Wakefield on behalf of the current owners, National Office Partners. “They are tremendously bullish on Boston,” one source said of RREEF. Beacon Capital Partners, meanwhile, earlier this month closed on its purchase of 116 Huntington Ave. in Boston’s Back Bay, a $77 million transaction, while Hines and a partner acquired the Wellesley Gateway project in Wellesley from the Druker Co.
Cushman also brokered the sale of the Wellesley asset, one of several stabilized properties that have garnered strong investor attention. Any one of the deals would be considered a rare opportunity to represent, but Maher said the sheer number of landmark sales should help establish 2004 as the best year for commercial real estate transactions ever enjoyed in the region. “They are all highly unique assets,” he said. “It just shows how much capital there is out there right now.”
Despite the trophy transactions that have already taken place, the Bay Colony deal may top all of those, with Griffin maintaining that it could be the largest single-asset suburban office sale ever completed in Massachusetts. It is also a good sign for the local economy, he said, and exemplifies the progress the Route 128/Massachusetts Turnpike corridor has made in 2004, with office leasing activity substantially improved. “It is certainly leading the recovery,” Griffin said of the Waltham submarket. “That is good news for properties” like Bay Colony.
According to third-quarter figures compiled by Spaulding & Slye Colliers, the Route 128/Massachusetts Turnpike corridor had 313,000 square feet of positive absorption in the third quarter alone, helping drop vacancy rates there to 17.4 percent. The asking rent in the 19.2 million-square-foot submarket is averaging $22.28 per square foot, Spaulding & Slye estimates, placing that rate well above other Greater Boston suburban submarkets.
Although some observers have questioned whether the estimated $265 per-square-foot price tag for Bay Colony is too high for the area’s revenue stream, Griffin disagreed. Totaling just under 1 million square feet, Bay Colony is one of a handful of suburban properties fetching rents above $30 per square foot, said Griffin. And given the quality construction and dedicated maintenance program at the park, Griffin said even a $250 million price tag would be well below replacement cost.
“This is as good as it gets in the suburbs,” seconded Maher of the property’s stature. “This is the yardstick.”
Even if a buyer is selected over the near term, Maher said it is unlikely Bay Colony will change hands by year’s end. It also appears that the Riverfront Office Park deal will also be carried into 2005, he said, although Cushman & Wakefield is still handling a number of sales that could be wrapped up by the end of the month. In a somewhat related move, Cushman & Wakefield has been named property manager of Riverfront by RREEF. The two-building, 660,000-square-foot complex includes One Main St. and 101 Main St.
