CB Richard Ellis Investors reportedly has agreed to purchase 101 Arch St., which straddles the Hub’s Financial District and Downtown Crossing area, from MetLife for about $89 million.
Continuing a series of rapid-fire office tower sales in Boston in 2002, a national real estate investment group has won a heated competition to acquire Boston’s 101 Arch St., industry sources told Banker & Tradesman last week. CB Richard Ellis Investors reportedly has agreed to pay an estimated $89 million for the 420,000-square-foot office tower, which straddles the Hub’s Financial District and Downtown Crossing retail sector.
“I know they have been picked,” one observer familiar with the sale said last week, while stressing that the current environment makes any real estate sale uncertain right up until the money changes hands. “You never know when they might cough up a hairball on the deal,” the source said. Just recently, for example, an agreement to sell Boston’s One Beacon St. office tower fell apart in the waning moments, and real estate brokers say retrades of commercial properties have been unusually high in 2002.
In any event, it appears CB Richard Ellis did beat out several other potential suitors for 101 Arch St., with the bidder list said to include partnerships of Prudential Real Estate and Lincoln Property Co., as well as the Gale Co. and J.P. Morgan. Ironically, while it is now owned by MetLife, 101 Arch St. was built in the 1980s by Lincoln Property Co., whose former principal, John Hynes III, now heads up Gale’s Boston office.
Calls to 101 Arch St.’s brokers, Cushman & Wakefield, were not returned by press deadline, while officials at CB Richard Ellis Investors were unavailable to discuss the matter. Regardless, it does appear that the firm has placed the tower under agreement.
Meanwhile, in a suburban sale also brokered by Cushman & Wakefield, Level 3 Communications reportedly has found a taker for its sprawling data center in Needham, albeit at a fraction of the replacement cost for the futuristic $100 million facility.
According to industry sources, the same group that struggled to develop the TechCommons data center in nearby Natick has placed the Level 3 property under agreement. That group includes a pair of New York developers, Rabina Realty and Jonathan Rose & Co. Sources estimate the sales price to be in the $15 million range, or about $65 per square foot for the 232,000-square-foot building.
Calls to the supposed buyers were not returned, while Cushman & Wakefield investment broker Richard Herlihy declined comment on the transaction. Despite the silence of the various parties, sources insisted that Rabina and Rose are purchasing the asset. Lending credence to that notion is the recent Massachusetts incorporation of TechCommons-Needham LLC, which lists Maidad Rabina of Scarsdale, N.Y., as the operation’s manager. Rabina is also the founder of Rabina Realty.
“They do have it,” insisted one Boston broker familiar with the Level 3 structure, which features three stories and 200 parking spaces on 7.8 acres. As with much of the fancy switch space developed in Boston in 1999 and 2000, Level 3 never occupied the property after building it out amidst great fanfare in 1999.
Interestingly, unlike other such assets, the new ownership is reportedly planning to use the Needham property for its original intention. “I think they are betting on a [rebound] in data center-type users,” said the broker following the sale. “They think there is still a market for it.” Another source said the new owners would target the space as a disaster recovery center, providing technology users with a safe backup system in case their primary location has problems. The building includes such features as redundant power systems and even a 400,000-gallon reservoir, which can operate the building’s cooling systems for up to 36 hours without outside water supplies.
Waiting Out the Cycle
While he would not discuss specifics of the sale, Herlihy said Cushman & Wakefield received a surprisingly encouraging number of offers for the property from a range of potential users. “It’s a beautiful facility,” Herlihy said, acknowledging that some observers had predicted the vacant special-use building would not generate widespread interest.
At present, the telecommunication industry does remain saddled with too much space and too little demand, said Insignia/ESG principal Steve Murphy, another Hub broker with expertise in the telecommunications arena. Murphy has been aiding the developers of iPark in Waltham in leasing up that sprawling data center and business park during the past three years, but said the current focus is on office tenants vs. telecom users. The iPark property does feature a state-of-the-art data center sporting upwards of 140,000 square feet, space that Murphy said he is confident will eventually find a taker. At present, however, he acknowledged that field is slow.
Certainly the telecommunications debacle proved how fickle the commercial real estate market can be, with the technology boom of the late 1990s spurring landlords throughout the region to position their properties for such use. Some buildings, including One Summer St. in Boston’s Downtown Crossing district, met with initial success, but the lion’s share of efforts have fallen by the wayside. Cabot, Cabot & Forbes is renovating its Allston technology center into biotech space, while a Watertown property that never got off the ground is now being eyed for a residential use. TechCommons in Natick, meanwhile, is in the process of being redeveloped by another company as retail space.
Other players have been willing to stick out the current downturn, with Qwest Communications still trying to find takers for a 50,000-square-foot data center in Braintree. If current reports bear out, it appears Rabina and Rose will push forward with the data center theme at the Needham asset, which is located in the Needham Industrial Park. Murphy is among those who believe the strategy could pay off – someday.
“It’s a great location and a great building,” he said. “But they are going to have to have a long-term investment horizon to wait out this cycle.”
