The Davis Cos. has agreed to buy the Bedford Business Park from Boston Properties for $62.8 million, or roughly $166 a square foot.
The 379,056-square-foot business park, comprised of office and lab space, has three buildings, including one three-story Class A office building. The others are a two-story research and development building and a series of two-story attached research and development buildings, according to Boston Properties’ website.
The Davis Cos. is buying the property at an approximately 9 percent cap rate, said Brad Takala, managing director of acquisitions for Davis. That means the firm should make back about 9 percent of its investment in the first year. That’s a much higher capitalization rate than many of the large, core properties that have recently sold, like 53 State St. and 33 Arch St. in Boston, which had cap rates of 4.3 percent and 4.7 percent, respectively, according to industry sources.
Boston Properties bought the buildings in 1976. The assets were built between 1962 and 1968 and are situated on a 22-acre site with more than 1,250 parking spaces. The properties have undergone a series of renovations, most recently in 2001.
National Development originally had the property under agreement, but decided not to go through with the deal because "we just found some things in our due diligence that caused us to not buy it," said Ted Tye, managing partner for National Development.
While Tye declined to elaborate, an industry source that asked to remain anonymous, said there have been concerns among potential investors about tenant credit and lease length issues the major tenants. But Takala said his firm is pleased with the purchase.
"We feel the Bedford location plays more to the Route 128 market characteristics than the Interstate 495 characteristics," Takala told Banker & Tradesman. "We like the current cash flow and long-term perspectives. We do have an angle to reposition the property. We believe it’s a good purchase based on current tenant lineup, which are especially technology-oriented. Boston Properties took very good care of it."
The Davis Cos. have looked at several options for the future of the property, including converting more space to lab use if and when it becomes available.
"Boston Properties has owned it forever," said the industry insider who asked for anonymity. "It’s and older product and clearly not a long-term hold for [Boston Properties]. This is Boston Properties pruning their portfolio and selling non-strategic assets."
