Zoll Medical, a manufacturer of cardiac devices currently based in Burlington, has agreed to sublease 160,000 square feet of office space at 269 Mill Road in Chelmsford, to which it will relocate its headquarters.
In a transaction that helps wrap up the first quarter of 2003 with a sorely needed bang, Zoll Medical has agreed to sublease 160,000 square feet of office space at 269 Mill Road in Chelmsford. The long-term agreement is expected to breathe a bit of life into a suburban Boston market that has been decimated by the downturn in the high-tech industry.
“The deal has been signed,” acknowledged Richards Barry Joyce & Partners President Robert B. Richards Jr. when contacted by Banker & Tradesman last week. Richards, whose firm represented Tellabs in the negotiations, referred additional questions to Zoll, which manufactures noninvasive cardiac devices. The tenant’s broker, Trammell Crow principal Brian T. Hines, also declined to discuss the matter in detail.
According to sources, Zoll will relocate its headquarters from Burlington to the Chelmsford facility, which along with the conjoined 271 Mill Road was constructed as a build-to-suit project for Tellabs by Boston Properties. As with other high-tech operations, most notably Cisco Systems, Tellabs soon found it had no use for its Chelmsford space, and set about offering it for sublease. RB&P principals Brian McKenzie and John Wilson were subsequently retained to lease the two buildings for Tellabs, recently cementing a major deal with Siemens for 271 Mill Road.
Siemens subleased 65,000 square feet of space in 271 Mill Road, to which it is relocating from Westford. Coupled with the Zoll Medical lease, the activity at the property “closes a big gap” for the Lowell/Chelmsford area, said one broker familiar with the latest pact. “It’s very healthy,” said the broker. “It’s a little bit of good news that we really need right now.”
Crossed Signals
Positive results have certainly not been the norm along Interstate 495 for some time, and perhaps no suburban sector has been impacted as severely as Lowell/Chelmsford. According to most industry reports, the office availability rate for that region has soared well above 30 percent, with per-square-foot rental rates plummeting into the mid-teens after being nearly double that when the market peaked in mid-2000. The boom-and-bust cycle has wreaked havoc on the market, as witnessed by the apparent collapse of a sale transaction involving the CrossPoint office complex in Lowell.
In that situation, New Jersey-based Advance Realty Group had committed to buying the three-building asset last summer, reportedly in the $155 million range. After the initial commitment, however, negotiations have dragged on to where it now appears the deal has fallen apart. Cushman & Wakefield had been retained to sell the property on behalf of the joint venture ownership, Yale Properties and Blackstone Real Estate Advisors. Even with the lengthy negotiations, C&W officials said as recently as two weeks ago that they were hopeful the sale would be consummated, but that no longer seems to be a likely scenario.
Advance principal Gary Sopko did not return phone calls by Banker & Tradesman’s press deadline, while C&W New England President Robert E. Griffin Jr. declined to discuss the situation. Nonetheless, sources did say it is unlikely at this point that the sale can be salvaged. “It’s really a casualty of the tech market,” said one investment specialist who has been tracking the CrossPoint deal for the past several months.
“There’s a universal realization that the leasing markets aren’t going to turn on a dime, and people are being very careful on any asset where there is rollover [of leases] in the next couple of years,” said the source. “The scrutiny is getting pretty deep.”
One source familiar with the discussions said Advance was at odds with the current ownership on near-term cash flow projections and the perceived risk of the submarket during the next 24 months. Another broker claimed Advance has a history of backing out of investment deals after tying properties up, maintaining that the firm took a similar dive last year after initially agreeing to buy the Westborough Office Park in Westborough.
The current struggles to sell CrossPoint do seem to reflect the roller coaster nature of the suburban office scene during the past decade. Originally built as the headquarters for Wang Computer, the hulking complex fell on hard times in the early 1990s when its lone occupant fell into bankruptcy. Those problems led to the sale of the development at auction for an unheard of price of 35 cents per square foot. After an extensive renovation, the new ownership group sold the property to Yale and Blackstone in the late 1990s for more than $100 million.
If the Advance deal cannot be resuscitated, it is unclear whether Yale and Blackstone will again offer the property up for sale or opt to wait until market conditions improve. The health of the I-495 market was called into further question recently when Cisco Systems announced it would offer several hundred thousand square feet of space in the submarket for sublease as part of its long-anticipated relocation to a new campus in Boxborough. Given the backdrop of problems afoot, the resolution of 269-271 Mill Road should offer a modicum of relief for the Chelmsford area, one broker concurred. “It’s an excellent deal,” said the broker. “You won’t find many [leases] any bigger out there this year.”
Joe Clements may be reached at jclements@thewarrengroup.com.
