When it comes to the first six months of 2000, Greater Boston’s commercial sales market was not half bad, according to local real estate specialists. While perhaps not as active as in past years, observers said the Bay State is still being targeted by a wide scope of investors, ranging from overseas monies to domestic pension funds and private opportunity players.
Meredith & Grew Oncor estimates that Greater Boston saw $600 million worth of investment transactions through the mid-year point, with the bulk of the activity focused on the office and industrial markets. There was one major retail deal completed, with Spaulding & Slye Colliers brokering the $117 million portfolio sale of 19 strip malls to Northstar Properties. The shopping centers had been owned by Shaw’s Supermarkets.
Even faced with a dwindling supply of buildings after several busy years, Boston’s office tower market has continued to see ownership changes during 2000, with Boston Capital paying $168 million for 99 High St. and Paradigm Properties and the Carlyle Group picking up the 20-story 99 Summer St. for $66 million.
Two other Financial District towers were placed under agreement during the first half of the year, as Blackstone Real Estate Advisors reportedly will pay $198 million for One Boston Place and Taurus New England Investments is said to have tied up 160 Federal St., a 355,000-square-foot office tower being sold by a trio of owners.
Compared to previous years, 2000 does appear to be somewhat slower than in recent campaigns, said investment broker George J. Fantini Jr. While stressing that he has not seen any precise numbers, Fantini said he believes rising interest rates and other recent developments are limiting commercial sales.
“The overall cost of capital has increased, and when that happens, it tends to put a damper on the investment market,” Fantini said. “The financing market does impact the investment market, and my guess is that there has been a [backlash].”
While agreeing that “it’s certainly not as easy as it was a couple of years ago,” investor Jonathan Davis said he still finds opportunities available, as witnessed by his company’s purchase last month of Charles River Plaza in downtown Boston. Along with that $76.2 million deal, the Davis Cos. is also pursuing an 800,000-square-foot acquisition in Boston’s Seaport District.
Because it is still in due diligence, Davis would not discuss the Seaport District deal, but said his firm pursued the Charles River Plaza due to a variety of reasons. Along with a strong tenant roster and prime location between North Station and the Financial District, Davis said his company was enthused by the notion of picking up a 950-vehicle parking garage as part of the deal. The 230,000-square-foot property is part of the sprawling Charles River Park mixed-use complex, one that has been sold piecemeal in the past two years to a variety of investors.
Sources also said that the site is zoned to accommodate another 700,000 square feet of new development. Although Davis declined to discuss that aspect of the deal, one source said it appears that the company is looking at adding a building about half that size to the property, and is supposedly already in discussions with city officials about that possibility.
Suburban Sightings
On the overall investment market, Davis said that real estate investment trusts continue to remain on the sidelines, with most of the competition coming from such groups as Paradigm, the New Boston Fund and Nordic Properties. Pension funds have also been busy, as witnessed by the California State Teachers Retirement System acquiring the Concord Road Corporate Center in Billerica, paying $42 million last month for the 350,000-square-foot property.
Other significant suburban deals included the New Boston Fund’s purchase of Watermill Center in Waltham and 303 Boston Post Road in Marlborough. Another Waltham office property, the Waltham Woods Corporate Center, fetched $260 per square foot when it sold in April, a level some maintain is a record for suburban office buildings.
Although the suburbs are beginning to draw attention, even from foreign buyers who have previously eschewed that market, Davis said he believes there is still a premium paid for Boston buildings, maintaining that many investors are concerned that it is easier to add new buildings to the outlying areas. “People love Boston because the supply remains so constrained and the barriers to entry remain so high,” he said.
The same is true across the river in Cambridge, where a slew of properties traded hands in the first half of 2000, and several more are now on the block being marketed at what would be record prices. Among the deals completed was the $49.2 million sale of Davenport Center; Star Market’s $12.7 million sale of its former headquarters on Mount Auburn Street to Prospectus, which plans to develop the space for third-party occupancy; and the $64.5 million purchase last month of 215 First St. by Capital Properties.
The big focus now is on the Riverfront Office Park, a pair of Class A buildings abutting the Charles River and located at the entrance of the super-tight Kendall Square office market. Blackstone Real Estate Advisors is reportedly seeking $400 per square foot for the 670,000-square-foot development, which includes One and 101 Main St.
