Bids placed this summer for Lafayette Corporate Center in Boston’s Downtown Crossing did not approach the $140 million mark developers had hoped to receive in selling the office/retail property.

Falling out of bed is never a pleasant experience at home, and the same is true in commercial real estate. Welcomed or not, however, industry professionals are increasingly having to deal with such disruptions when it comes to property sales.

With both buyers and sellers apparently unsure of where the market is heading amidst the current economic decline, several high-profile transactions are having difficulty moving to completion. In one such instance, the Intercontinental Cos. has opted to pull back on the sale of 343 Congress St. in Boston’s Fort Point Channel district, a former garage that was converted last year into Class A office space. Sources said the owners are looking to recast the 100,000-square-foot property early next year, hopefully amidst improved conditions.

In perhaps a more alarming example, the Lafayette Corporate Center in Boston’s Downtown Crossing is being recirculated after receiving only a handful of proposals in the initial call for bid offers. When it was placed on the sales block earlier this summer, most observers had predicted the office/retail property would garner widespread attention, but such was not the case in the first go-round. Only a handful of bids were submitted, none of which were near the $140 million asking price set by the developers, Patriot Games LLC.

“This is the type of asset that should do better than the numbers that came in,” said Trammell Crow Co. principal Edward C. Maher Jr., whose firm is brokering the sale of the 615,000-square-foot building. “We got some good offers, but they weren’t great offers.”

Maher attributed the tepid response for Lafayette Corporate Center to the timing of the offering, with many overseas investors in the midst of their protracted summer holiday when bids were due. A renewed effort should yield more of those players, he predicted, and possibly some domestic institutional capital that also previously failed to respond. The anticipated leasing of the retail space should help bolster interest, said Maher, who insisted that the economic uncertainty will not stand in the way of finding a buyer.

“We are taking a step back, but it is still on the market,” he said. “We are continuing to talk to people.”

Whatever the cause, the failure of Lafayette Corporate Center to find a buyer is considered a surprise, given that credit quality of tenants and stability of a property are among the most important criteria for selling an office development in the current environment. The one-time mall today is anchored by such solid companies as State Street Corp. and MFS Investment Management, each of which has inked long-term leases.

Indeed, sources said the main roadblock at 343 Congress St. stems from a recent announcement by tenant Nextera that it would sublease a substantial portion of its space as a result of the continuing troubles in the technology sector. One source said Intercontinental decided to pull the property off the market until the leasing situation is resolved. Calls to Intercontinental officials were not returned by press deadline, but the sources insisted the property is no longer being actively marketed.

‘Different Waters’
In the case of 343 Congress St., it is unclear whether any offers were ever submitted and were simply deemed unacceptable, but brokers such as Michael G. Smith of Spaulding & Slye Colliers acknowledge that it is getting harder to bring both sides together to consummate a sale.

“The bid/ask gap is real, and in some cases, it is to the point where the seller had expectations that were so misaligned with the current [climate], it is difficult to get things done,” Smith said, adding, “We definitely have seen deals falling out of bed.”

Thomas A. Walsh of Insignia/ESG’s Capital Advisors Group agreed with Maher that European capital is very difficult to access in the summertime, and said he believes there is going to be money available from there and other sources as 2001’s investment campaign moves into the crucial fourth quarter. He also said there are signs that sellers are being more realistic in their pricing, especially when it comes to suburban properties. Still, Walsh said there are property owners who will not take that route, with some preferring to either refinance their buildings or wait to see whether the market will begin to rebound in the coming months.

“There are just some properties that are not going to go on the market,” he said. “If the seller can afford to wait until the middle of next year, that’s what they are going to do.”

For his part, Maher said that he believes there is plenty of life remaining in the Bay State’s investment market, which has been white-hot for the past five years. While concurring that some property owners will stand pat for the time being, Maher insisted it is a good climate to seek investors, whether it be for debt or equity financing.

“There’s no shortage of cash out there,” Maher said. “It [the investment market] isn’t completely dead yet.”

In fact, Maher said, Trammell Crow is on pace to broker nearly two dozen major property sales this year, or about the same as it has done in recent years. The firm has already broken the $1 billion mark in total sales. Trammell Crow has eight deals under contract at present, and could have another half-dozen closed by year-end, Maher said.

Smith said he also believes that the final few months will yield more sales, stressing that the key as a seller is to select a buyer with serious intention and fiscal wherewithal to see a deal through to completion. “It generally is not positive for an asset” to be rebid, he said.

“It’s very different waters today than a year ago,” Smith said. “There’s much more turbulence and you’ve got to be much more careful in who you pick and in making sure their understanding and your understanding are similar.”