A number of suitors may still be in the running to purchase the 310,000-square-foot, 16-story office building at 200 State St. in Boston, with Beacon Capital Partners said by some observers to be at the head of the pack.
After several months of marketing, the chase for Boston’s 200 State St. is hitting a fever pitch, and some interesting names are said to be leading the pack. Among the usual suspects are Beacon Capital Partners and the RREEF Funds, while a joint venture of Rockwood Capital and Spaulding & Slye Colliers reportedly also is in the hunt.
Officials at Beacon declined comment when contacted by Banker & Tradesman last Friday, but the Boston-based real estate investment group reportedly has bid between $135 million and $140 million for the property, which features a mix of office and high-end retail space. Developed in 1985 by Sullivan Properties, 200 State St. is located at the gateway to Faneuil Hall Marketplace and is on the northeast end of the city’s Financial District.
Although one source claimed Beacon was “the odds-on favorite” to win the competition for 200 State St., others maintained that no final decision has been made. Holliday Fenoglio Fowler is brokering the sale of the building on behalf of Sullivan Properties. Company officials at HFF’s Boston office did not respond by press deadline on the status of the deal.
If Beacon were to emerge the victor for the 16-story tower, it would be just the latest Massachusetts property snared by the homegrown operation in recent months, headlined by last month’s acquisition of the Bay Colony Corporate Center in Waltham. As in the case of 200 State St., a bevy of well-heeled suitors pursued the Bay Colony opportunity, with the 987,000-square-foot complex ultimately purchased for just over $272 million, or about $280 per square foot. That record-breaking deal had been preceded by Beacon’s acquisition in December of 116 Huntington Ave. in Boston’s Back Bay district, a submarket where Beacon has a major presence, including ownership of 501 Boylston St. and the John Hancock Tower and office complex. Beacon paid $77.3 million for 116 Huntington Ave. to the New Boston Fund, which had bought the 14-story, 265,000-square-foot building two years earlier for $68 million.
As intriguing as Beacon’s interest in 200 State St. is the rumored teaming of Spaulding & Slye Colliers and Rockwood Capital, with the latter group just last week completing its sale of two prominent Cambridge office buildings for $115 million. Spaulding & Slye’s investment sales group negotiated that deal for the two waterfront buildings, which Rockwood had acquired less than two years ago for $84 million.
Spaulding & Slye officials were not available by press deadline to discuss its supposed pursuit of 200 State St., which one observer said may be done partly to allow the real estate investment firm to relocate its headquarters from nearby 255 State St. According to some sources, 255 State St. lead tenant Eaton Vance may be in need of the Spaulding & Slye space.
“It could solve a lot of issues” for Spaulding & Slye, said one broker of a potential purchase of 200 State St. Spaulding & Slye does not have any stake in 255 State St., but the venerable real estate firm had been a minority owner in 125 High St., the twin-tower office complex developed in the early 1990s for the erstwhile New England Telephone and Traveler’s Insurance. Spaulding & Slye relocated to 255 State St. after 125 High St. was acquired by Jamestown in 1999.
‘Improving Market’
According to sources, other investors who pursued 200 State St. included the aforementioned RREEF, as well as Boston Properties, Equity Office Properties and ING Clarion, although it is unclear whether any of those entities submitted actual bids on the asset. There has been some concern expressed about the leasing roster in the 310,000-square-foot property, which some estimate to have a 25 percent vacancy rate, but it appears the sellers received a significant level of interest, while estimates of the bid pricing of $135 million to $140 million was rated strongly by several observers.
“That’s a great price,” one investment sales specialist said.
Richards Barry Joyce & Partners principal John P. Barry, who has been handling leasing of 200 State St. for the past three years, said he believes investors have been enthused by the building’s potential in the wake of the Central Artery being dismantled. The hulking viaduct had been located within a few inches of 200 State St. prior to being depressed underground, offering 200 State St. immediate reconnection to the Boston waterfront, noted Barry.
“It is some of the nicest real estate in Boston,” said Barry. “It has gone from being a very good building to being a great building.”
The level of interest in Boston real estate remains encouraging, others said, with the region enjoying a record sales year in 2004. At this point, conditions show no sign of easing up, said Lisa Campoli of Meredith & Grew Oncor, whose firm recently brokered a $34 million sale of two buildings in the Hub’s Fort Point Channel district. After trading an estimated $500 million worth of properties last year, Meredith & Grew could even produce greater results in 2005, said Campoli, who cites a combination of capital flooding the market and better results on the leasing front for prompting such optimism.
“People feel like they are buying into an improving market,” said Campoli, adding that her firm is already busier to date this year than it was in February 2004. Bolstering the supply of money available is a solid pipeline of product to sell, said Campoli. “A lot of [property owners] are realizing that the sales climate isn’t going to get any better than this,” she said, particularly given the prospect of rising interest rates.
As for 200 State St., sources said they believe the owners are accepting a final round of bidding and could make a decision as early as this week on who will be selected.
