Advance Realty Group’s plan to buy the CrossPoint office complex in Lowell is under agreement, but the purchase from owner Yale Properties has yet to close some six months after the New Jersey-based investment group committed to the deal.
In the current commercial real estate environment, patience is not only a virtue, it is increasingly becoming a necessity.
While certain assets have traded in a timely manner, brokers are reporting that the negotiation process on selling property is typically much longer than in the boom period leading up to mid-2000. In some instances, sales efforts are taking more than a year from start to finish, and in others, even 12 months is not sufficient.
“Everything takes forever nowadays,” said CB Richard Ellis/Whittier Partners principal Gary J. Lemire. “People are being very careful.”
Lemire should know, having brokered the sale earlier this month of 111 Devonshire St. in Boston to CFO Equities. The $11.5 million transaction took nearly 18 months to complete, said Lemire, who explained part of the delay was working out a long-term lease with the 10-story building’s sellers, Moors & Cabot. The money management firm will occupy about half of the 60,000-square-foot structure, a Class B office property strategically located in the Hub’s Financial District.
Another deal that has extended indefinitely is 160 North Washington St. in Boston, which Nordic Properties has been negotiating to acquire for well over a year. Efforts to contact Nordic principal Ogden Hunnewell were unsuccessful, but he did recently acknowledge that the Burlington-based firm remains interested in buying the aging but well-located property in Boston’s North Station district.
Meanwhile, in suburban Boston, Advance Realty Group has Lowell’s CrossPoint office complex under agreement, but the purchase from owner Yale Properties has yet to close some six months after the New Jersey-based investment group committed to the deal. Efforts to contact Advance principal Gary Sopko were unsuccessful, but one broker familiar with the deal concurred that the suitor is pursuing the asset. “They are still threatening to buy it,” quipped the broker, alluding to the protracted negotiations. According to another broker, Advance has cited an unanticipated level of lease rollover as one stumbling block it is trying to work through.
Officials at Cushman & Wakefield also confirmed that Advance does still have the three-building, 1.2 million-square-foot complex under agreement, but declined to estimate when a sale might be consummated. It is unclear whether Advance has tried to ratchet the sales price downward, with initial estimates placing the bid in the $155 million range. The Interstate 495 North market in which CrossPoint is located has been among the hardest-hit by the slumping economy.
‘A Big Issue’
One deal that has supposedly become hung up on pricing is Boston’s 745 Atlantic Ave., which Berkeley Investments recently agreed to buy on behalf of a German client. “It just blew up on them,” one broker said, claiming the buyer tried to retrade the price, which had been estimated in the $55 million range. Calls to the brokers, Holliday Fenoglio Fowler, and to Berkeley principal Young Park were not returned by press deadline. The 11-story, 168,000-square-foot building is owned by Lend Lease Real Estate Investments.
Even with the challenges of buying commercial real estate in the current environment, brokers say the clamor for product remains strong, reflecting a lack of alternative investments, record-low interest rates and a long-term belief in the health of the asset class. The biggest concern at present, according to Cushman & Wakefield New England President Robert E. Griffin Jr., is getting through the next three years. With that in mind, investors are looking to buy properties sporting solid in-place cash flow over the short term. “Credit and term is a big issue,” said Griffin. “That’s what everybody is looking for.”
C&W principal Edward C. Maher Jr. said that concern is reflected in the types of product garnering attention. “Certain assets can sell all day long,” he said, including grocery-anchored retail, trophy office towers and corporate facilities with long-term leases in place. On the flip side, suburban office properties need a solid tenant roster or else buyers will not pursue them, Maher said, at least not at a price acceptable to the seller.
Despite the jittery nature of the real estate market, deals continue to proceed along, and some owners are beginning to test the waters. Included in that is the Wayland Business Center, a former Raytheon facility acquired by Congress Group Ventures in 1997 for $15.5 million. C&W has been retained to sell the six-acre, 400,000-square-foot complex for Congress Group. Efforts to contact C&W broker Richard Herlihy, who is marketing the deal, were unsuccessful by press deadline, but sources insisted the asset is on the market.
Overall, Lemire said he believes investment sales volume will improve in the coming months, even if deals do take longer to complete. “Investors have shown they are still interested in buying real estate,” said Lemire, with multifamily among the most popular targets. Lemire is also in the final stages of selling a pair of flex buildings in Marlborough, anticipating that a closing could occur within the next few weeks. Lemire confirmed that a New York investment group has the buildings under agreement, but declined to identify the prospect.
Joe Clements may be reached at jclements@thewarrengroup.com.
