Paradigm Properties and the Carlyle Group reportedly have found a California-based buyer for their jointly owned office tower at 99 Summer St. near Boston’s Financial District.
A California real estate investment trust is buying 99 Summer St., downtown Boston’s distinctive red-roofed office tower, Banker & Tradesman has learned. Currently owned in a partnership between Paradigm Properties and the Carlyle Group, the 20-story structure is under agreement to Glenborough Realty Trust of San Mateo, according to industry sources, who pegged the price in the low $70 million range.
Calls to Glenborough and Paradigm officials were not returned by press deadline, but Spaulding & Slye Colliers principal Richard W Reynolds acknowledged that a deal is in the works. “We are [brokering] a transaction involving 99 Summer St., but at this point, because nothing is final, we cannot comment any further,” said Reynolds, who declined to identify the suitor or specific financial aspects of the agreement.
Spaulding & Slye is also reportedly negotiating the sale of two Cambridge buildings to a Connecticut investor. While Reynolds said he was unable to discuss that matter in detail as well, sources said Rockwood Capital is acquiring the buildings at One Rogers St. and One Charles Park from IBM Corp. for an unspecified price. Efforts to contact Rockwood officials were unsuccessful, but sources claimed that the sale is imminent, offering a boost to the struggling Cambridge office market.
As for 99 Summer St., one source familiar with that deal insisted that Glenborough is the buyer, and pegged the price at about $265 per square foot, or somewhere in the $71 million to $74 million range, depending on how the square footage for the asset is calculated. Another source stressed that “the money is hard” on the agreement, indicating the REIT’s financial commitment to buying the property. Paradigm and Carlyle paid about $240 per square foot when they acquired 99 Summer St. in the spring of 2000 for $66 million, considered a bargain-basement deal at the time for an established Boston office building.
Situated between Downtown Crossing and the emerging South Station market, 99 Summer St. was one of several pioneering office projects that tested the boundaries of the Financial District in the late 1980s. Originally developed by Richard Rubin, the building was hit hard by the recession that lasted through 1992, with sluggish leasing leading to financial woes for the Jaymont Group. That Middle-Eastern investment outfit, which bought 99 Summer St. while still under construction, was forced to file for bankruptcy in 1991. The building was later purchased by the Archon Group prior to the sale to Paradigm and Carlyle.
Market Interest
Founded in 1997, Paradigm has partnered with Washington, D.C.-based Carlyle on other deals in recent years, and also has joint venture agreements for such Boston buildings as 711 Atlantic Ave., 18 Tremont St., 45 Bromfield St. and its headquarters at 31 Milk St. Paradigm’s total portfolio is estimated at about 3.5 million square feet. The sale to Glenborough reportedly was done without a broad-based marketing campaign, with the investment brokers instead offering the asset selectively to certain prospects. The latest pact follows an unsuccessful effort to trade the building last summer when a reportedly higher asking price was met with little interest by potential buyers. The Paradigm/Carlyle partnership had better luck later in 2002 when it sold 955 Massachusetts Ave. in Cambridge to local developer/owner H.N. Gorin Co. for the asking price of $22.5 million.
Similar to Paradigm’s approach, Glenborough touts itself as a real estate owner/operator that favors multitenanted buildings in strong locations. Founded in 1995, but with roots dating back to the 1970s, the REIT had 839 tenants in 67 properties at the end of the first quarter, according to company financial information. The portfolio encompasses 14 million square feet of space, 80 percent of which is concentrated in seven core markets. Greater Boston is included in that septuple, with Glenborough also active in Southern and Northern California, Northern New Jersey, Denver, Chicago and Washington, D.C.
Locally, Glenborough has just over 1.1 million square feet of industrial and office properties, with assets in such communities as Canton, Lexington, Weymouth and Westborough. The largest property is Glenborough’s seven-building Marlborough Corporate Plaza in Marlborough, which features 570,000 square feet of first-class office space. That complex was purchased in 1998 when Glenborough acquired a 39-building portfolio assembled by the Boston-based Windsor Realty Fund in a $420 million sale. Reynolds himself had helped assemble the package on behalf of Windsor, which also recently purchased the Westborough Office Park in Westborough.
In any event, the Boston and Cambridge deals brokered by Spaulding & Slye indicate continued interest in Boston from a commercial real estate perspective, even though the local office market has plunged into its worst crisis since the early 1990s. Office towers sales have been particularly absent after several years of heavy trading of properties in downtown Boston and the Back Bay. Cambridge had also been a hotbed of activity until its office fortunes turned on a dime in mid-2000. Now, there are only a handful of buildings up for sale in Cambridge, although Cushman & Wakefield was recently retained to trade the Millennium Pharmaceuticals headquarters at University Park at MIT near Central Square.
Sources familiar with the Rockwood Capital deal said it appears to be a mix of stability and risk that drove the buyer’s interest. IBM has agreed to lease a substantial portion of the space, but one source said the remainder would be renovated and repositioned for multitenanted use in a competitive submarket.
