Reportedly seeking a partner or a buyer for the second phase of its Channel Center development in South Boston, Beacon Capital Partners last month acquired a signature Hub property at 116 Huntington Ave. (pictured) from New Boston Fund for a price said to be just over $77 million. The 14-story, 265,000-square-foot office building is located adjacent to Copley Place and the Prudential Center.
Real estate investors looking for opportunities may soon be able to tune into South Boston’s Channel Center.
Even as owner Beacon Capital Partners puts the final touches on the $350 million development’s initial phase, the Boston-based firm is reportedly offering the second portion of the project up for sale or as a possible joint venture deal. According to industry sources, Cushman & Wakefield of Massachusetts has been retained by Beacon to market that proposed piece, which would entail a combination of new construction and renovation of an existing property into residential space, most likely condominiums.
“It looks like it’s a go,” one source told Banker & Tradesman last week of the marketing effort on Phase Two. The phase reported to be on the block would be developed as 5 Channel Center, and is expected to produce about 200,000 square feet of space when constructed. It is unclear how many residential units would be produced in that footprint.
Unlike Phase One, which encompasses two separate buildings totaling 120 condominiums, 5 Channel Center would have one entrance for use by tenants occupying both the new and converted space. Phase One contained about 200,000 square feet in the two buildings at 25 and 35 Channel Center, while a separate artist live/work building was also constructed as part of the project’s opening salvo. That property is known as 15 Channel Center.
Beacon Capital officials declined comment on the situation last week, while efforts to contact Cushman & Wakefield’s investment sales group were unsuccessful by press deadline. Despite that, sources insisted that 5 Channel Center is being offered up to investors by Cushman & Wakefield, although it is unclear how long the marketing process might take the ownership group. One source maintained that Beacon may simply be “testing the waters” to see what sort of interest could be generated. The source noted that many other real estate trial balloons have been reined in after receiving insufficient interest among investors.
According to the source, who is familiar with the property, Beacon may also be looking to hedge its exposure on what is certainly an ambitious development program. Acquired in 2001 from Boston Wharf Co., the 18-building complex of old warehouse properties ultimately is expected to yield more than 1.55 million square feet of space, including new and renovated structures accommodating a range of office, retail and residential uses. “It’s a pioneering project for them,” said the source in speculating why Beacon would be exploring a sale. “It’s a lot for one [firm] to handle.”
Despite that outlook, initial indications are that Beacon has fared well with Channel Center among condominium buyers. One source estimated that the company has sold about 75 of the 120 units produced in the first phase. The inaugural portion of the project included renovation of an existing five-story building and construction of a 13-story structure next door, the latter one being labeled as 25 Channel Center. That phase was designed by Bruner/Cott Architects of Cambridge.
Whatever the motivation behind the latest move, observers spoken with last week expressed confidence that Beacon has a clear strategy in mind. “I’m sure they’ve thought it through,” said one broker. “It’s a very savvy company.”
Beacon has been one of the area’s most active developers and investors in Boston in recent years, with the firm buying or developing properties throughout the Hub and Cambridge. The firm’s most recognized asset in its portfolio would be the John Hancock Tower in Boston’s Back Bay district, which Beacon acquired for more than $900 million in 2003, while the firm also owns the nearby 501 Boylston St. That property has been repositioned as the Newbury, and is in the process of being leased up as a multi-tenanted office/retail building.
Most recently, Beacon last month acquired 116 Huntington Ave. from New Boston Fund for a price said to be just over $77 million. The 14-story, 265,000-square-foot office building is located adjacent to Copley Place and the Prudential Center.
As for Channel Center, it is unclear what the schedule for full build-out is at this point, or whether changing market conditions are prompting Beacon to consider modifying future portions of the project. With the Hub’s office market in disarray, for example, some industry professionals claim it may be years before new office construction is justified, whereas the residential sector shows little sign of slowing down over the near term.
Joe Clements may be reached at jclements@thewarrengroup.com.
