Numerous Boston properties traded hands this summer, bolstering the commercial real estate market during a traditionally slow period.
And now comes the busy season? Inaugurated by the $705 million sale of Boston’s One Beacon St. in January and the continued turnover of both distressed and super-prime assets throughout Massachusetts, commercial real estate sales have already enjoyed one of their best years on record as the investment sector heads into the final third of 2004, the time when most deals are traditionally consummated.
Even with the prospect of rising interest rates threatening to dampen investor returns over time, most brokers report a steady surge of capital clamoring for real estate opportunities. Retail and multifamily top the preferred product types, but office, industrial and even certain hospitality assets are also garnering impressive interest. Deals are taking longer to complete, with due diligence intense and rental rosters carefully being scrutinized by suitors, but those buildings which survive the inspections are changing hands. A narrowing of the bid/ask gap which quashed many commercial sales in 2003 has lessened, according to observers, while stronger leasing velocity reportedly has made it easier to peg pricing on a property. The inability to determine leasing rates was once seen as making it harder to sell buildings.
Typically a slow stretch for activity, the summer has seen a number of significant commercial properties turn over in 2004, including the recent $120 million purchase of six grocery-anchored shopping centers by a Florida real estate investment trust, Equity One Inc. Retail sales specialists B. William Moylan and Chris Angelone at CB Richard Ellis/Whittier Partners brokered that major deal, and have also been busy overseeing sales of malls and strip centers in Connecticut and Rhode Island. Equity and a bevy of other well-heeled investors are said to be lining up for the limited supply of retail offerings available throughout the region, promising that other retail deals will be completed by year’s end. Linear Retail Properties of Burlington, for example, has $200 million to spend on retail assets in Greater Boston, with three such properties already in tow.
Spaulding & Slye Colliers and Cushman & Wakefield also have brokered several retail deals of late, including the $110 million sale of 350 Washington St. in Boston’s Downtown Crossing district, a transaction handled by Cushman’s Geoff Millerd. The multi-level retail center was purchased by a New York firm on behalf of a client shortly after being put on the market by Eastern Development LLC of Woburn, with the centrally located property trading for more than $700 per square foot. The 155,000-square-foot complex features tenants H&M, Marshall’s and a popular health club.
Market Additions
Elsewhere in downtown Boston, properties such as One State St., 100 Franklin St. and 186 Lincoln St. have all found new owners this summer, while others are in the process of being dispersed, including 31 Milk St., One Washington Mall and 160 Federal St. Meanwhile, as reported in last week’s Banker & Tradesman, the Mayo Group of Roxbury has agreed to purchase 211 Congress St., a 68,000-square-foot retail/office building in the Financial District, as well as the aging 121 Portland St. in the nearby North Station district. Mayo reportedly will pay between $15 million and $17 million for 211 Congress St. and just over $7 million for 121 Portland St.
Boston’s Tremont Street has seen its own spate of investment action in 2004, with Paradigm Properties and Westbrook Partners just putting 18 Tremont St. up for sale, while a trustee of Suffolk University recently paid more than $80 million for 73 Tremont St., then struck a master lease with the school that will allow it to move various university operations into the 13-story office building. In addition, a New York investment group has committed to buying the One Beacon St. office tower at the corner of Beacon and Tremont streets from its owners, Westbrook and Prudential Real Estate Investors. That 34-story tower is expected to sell for more than $360 million.
Perhaps equally surprising as the number of buildings already under new ownership is the unrelenting surge of additional assets being put on the block. Although owners often determine early on in a year whether they will pursue a sale, it appears the amount of capital available is prompting many to jump on board the marketing platform late in the game, with several new opportunities being announced in recent weeks. Experts also cite the interest rate threat as spurring the drive to sell properties today, with buyers less likely to pay record pricing once rates begin to increase.
Whatever the reason, new properties continue to be brought to the investment table. Among others, Boston Wharf Co. has retained Meredith & Grew to sell 253 Summer St. and several connected buildings in the Hub’s Fort Point Channel district, while brokers David McElroy and David Fitzgerald of CBRE/Whittier have been hired to sell One Court St. on behalf of the owners, Brighton-based Intercontinental Real Estate Corp.
Cambridge and suburban Boston also are yielding fresh prospects. Cushman & Wakefield recently was retained to sell both One Newton Place in Newton Corner and the Riverfront Office Park in Cambridge, the latter part of a national portfolio being shopped by Hines Interests and the California Public Employees Retirement System. Totaling more than 670,000 square feet, the two-building Riverfront Office Park is expected to sell for more than $200 million.
