Eastern Real Estate has taken control of the 970,000-square-foot Bay Colony Corporate Center in Waltham, capping months of intrigue at the Class A office property.
Sources familiar with the deal told Banker & Tradesman the Woburn developers recently sent an e-mail to local brokerage houses, introducing themselves as the property’s new owner. Eastern bought a controlling position in the property by acquiring the complex’s mezzanine debt from Lehman Bros. Holdings. In effect, Eastern received a deed in lieu of foreclosing on Lehman’s equity. Bay Colony was previously owned by New York real estate investors Broadway Partners.
Broadway’s mezzanine debt at Bay Colony matured in mid-May. Prudential Insurance’s real estate arm retains the senior mortgage on the property. Eastern now assumes responsibility for servicing that mortgage. Paperwork filed with the secretary of state last week transferred control of Bay Colony’s holding LLC’s to Eastern executives Raymond Murphy and Daniel Doherty III.
In July, Broadway announced it was surrendering Bay Colony and two properties in New York and San Francisco, part of a 10-property, market-peak acquisition spree, to Lehman through voluntary foreclosure. The foreclosures allowed Broadway to restructure the mezzanine debt tied to the 10-property portfolio. Under the terms of the restructuring, Lehman agreed to extend the maturity of Broadway’s $459 million in debt until 2012, and allowed Broadway to retain a majority stake in the remaining seven properties.
Eastern executives could not be reached for comment. The firm’s Web site lists Bay Colony as an investment asset, saying that Eastern "purchased a discounted loan position from Lehman Brothers."
In the last serious commercial downturn, Eastern’s founders famously scooped up Wang’s former headquarters in Lowell on the cheap, and later sold the property for an enormous profit. Eastern will have difficulties matching that achievement in Waltham, where falling rents, mounting vacancies and the delivery of new developments have taken some shine off what was once the city’s premiere office address.
In March, Normandy Real Estate Partners seized the Broadway-owned John Hancock Tower in Boston through a mezzanine purchase.
