One Faneuil Hall Square, Boston
An ornate building developed by architect Graham Gund is under agreement to a pair of New York investors, according to industry sources, with Robert Cayre and Alex Adjmi expected to pay approximately $23 million for One Faneuil Hall Square. The 7-story, 47,000-square-foot building overlooks the Hub’s Faneuil Hall Marketplace and was until last year fully occupied by trendy retailer the Limited.
“It’s definitely happening,” one source told Banker & Tradesman, maintaining that the suitors preempted a competitive bid process by paying close to the target price of $500 per square foot and placing a hefty deposit on the 16-year-old building. Officials at Spaulding & Slye Colliers declined to provide details, but did confirm that One Faneuil Hall Square has been taken off the sales block. The Boston-based real estate services team is negotiating for the owners, Faneuil Square Holdings Inc., an overseas investment group which paid $22.5 million for the building in 1993.
The deal is the latest in a flurry of activity for Spaulding & Slye’s investment sales division, which started the month by negotiating the $37.5 million disposition of nearby 18 Tremont St. after also trading Two Liberty Square earlier in the year to ELV Assoc. for $15.2 million. The investment group of Cappy Daume, Michael Smith and Scott Jamieson was just selected to handle the sale of 40 Broad St., an 11-story office building also near Faneuil Hall.
Sources said the closing of One Faneuil Hall Square will be delayed until mid-summer to allow the owners to find another property to purchase as part of an apparent 1031 tax-free exchange strategy. Under the 1031 program, sellers of a commercial asset can avoid federal capital gains taxes by investing proceeds into another property, but the second deal must be completed within a stringent time period. According to sources, the principals of Faneuil Square Holdings Inc. are pursuing deals in the Washington, D.C., area. Daume would only stress that the deposit on One Faneuil Hall Square is “hard,” or non-refundable. “It’s as good as done,” Daume said of the sale despite the delay on a closing, for which she would not set a date.
The future use of One Faneuil Hall Square is unclear, although observers said the buyers have a background in the retail arena. Daume said she does not believe a final plan has been formulated. The investors “are exploring their options,” said Daume. As with other downtown Boston buildings put on the sales block in recent months, One Faneuil Hall Square was reportedly eyed for a range of uses, including hotel and residential concepts.
While hardly the largest building in Boston, One Faneuil Hall Square is among the more acclaimed structures, featuring granite and marble materials that cast a pinkish hue and green-tinted windows that provide further color. Gund initially conceived the building for office space, but a 15-year lease with the Limited altered that vision and the Ohio-based retailer opened its flagship Boston store amidst great fanfare in 1989. Constructed by Gund’s real estate arm, Gunwyn Development, the building won a coveted design award in 1990 from the National Association of Industrial and Office Properties.
Even with the building completely vacant, One Faneuil Hall Square received an encouraging level of interest in the latest round, said Smith, partly due to the property’s quality but also as a result of the continued ardor for commercial real estate in the Hub. Some 150 investors requested information, and several bidders were supposedly chasing the asset when the process was preempted by Adjmi and Cayre. The surge of capital was also evident in the sale of 18 Tremont St., a 12-story, 202,000-square-foot retail/office building just purchased by Meritage Properties of New York. The firm paid approximately $187 per square foot for the building, which was acquired in 1999 by Paradigm Properties and Westbrook Partners for $30.9 million.
As with other downtown office buildings, the difficult economy increased vacancy at 18 Tremont St., but an aggressive leasing program prior to the sale has since brought occupancy there above 90 percent, said Daume. “The small-tenant market is a very active one right now,” she said, especially as competing properties are converted to other uses. Some investors had considered such a concept for 18 Tremont St., but buyer Andrew Nathan insists that the building is well positioned for a rebound in Boston’s office market.
