225 Friend St., near Boston’s North Station, is one of two Hub properties being sold by Meridien Investment Management for nearly $20 million.
After circling the Hub with several suburban property acquisitions, Essex River Ventures and its capital partner are grabbing a piece of downtown Boston through the purchase of two office buildings from Meridien Investment Management Inc. Industry sources estimate that 225 Friend St. and 186 Lincoln St. will fetch a total of nearly $20 million.
“It’s going to happen,” insisted one source close to the negotiations. Essex and the Praedium Group LLC have already inked a purchase-and-sale pact and supposedly provided a substantial deposit last week to tie up the assets. The buildings are being marketed by CBRE/Whittier Partners of Boston.
Citing confidentiality agreements, CBRE/Whittier principal Gary J. Lemire declined to discuss details of the deal, as did Essex River Ventures founder John W. Fenton. Efforts to contact Praedium Group officials in their New York City offices were unsuccessful by press deadline.
Andover-based Essex River and Praedium have been on an extended buying spree in the area during the past year, having already purchased such properties as the Great Woods Office Park in Mansfield and a multi-building office complex in New Hampshire. Fenton would not identify any specific targets, but did agree that the partnership is bullish on southern New England, with the team currently pursuing nearly 900,000 square feet of commercial space in Massachusetts and Rhode Island.
“We’re very encouraged by the market and the opportunities in the market, and to that end, we do have a number of deals under contract,” said Fenton, who previously worked for Berkeley Investments prior to launching his own real estate ship.
Among the largest assets that Essex River and Praedium are rumored to have under agreement is the Lexington Corporate Center in Lexington, which features 285,000 square feet in four connected structures. Banker & Tradesman reported last month that the partnership is preparing to buy the complex, with sources estimating the price to be in the $35 million range. As with the Boston properties, Fenton said he could not comment about the Lexington situation, although sources maintained that the deal is close to completion.
While Lemire would not identify the buyers of 225 Friend St. and 186 Lincoln St., he said the properties received considerable attention among potential suitors. Attributes include a strong tenant roster and improvements made by Meridien during its tenure, according to Lemire, with occupancy well into the 90 percent range and only limited rental turnover scheduled over the near term. Even though the two buildings are in different parts of downtown, with 225 Friend St. in North Station and 186 Lincoln St. in the city’s so-called Leather District, Lemire said both are poised to benefit from the depression of the Central Artery, given that most of the work on that massive Big Dig public works project has already been completed in those two districts.
“The transformation that has taken place is incredible,” said Lemire. One source said the progress on the artery was “definitely” a factor in Essex River and Praedium committing to the Meridien buildings. Conversely, other sources said the willingness of the buyers to acquire both buildings gave them a bargaining edge over other parties who wanted to merely acquire one or the other asset. Meridien paid $8.2 million for 225 Friend St. in 1999 and purchased 186 Lincoln St. in 2000 for just over $11 million.
Small Appeal
Totaling about 127,000 square feet, 225 Friend St. and 186 Lincoln St. will trade for between $155 and $160 per square foot, according to sources. The deal is coming together just as the 2004 selling season kicks into gear for commercial real estate, with all indications being that the recent woes for property landlords are not hampering transaction velocity. Indeed, the prospect of rising interest rates and the presence of several tempting deals appear to be bringing activity to a fever pitch. Most recently, Fidelity Investments announced that it was offering 7 Water St. and 245 Summer St. in Boston for sale, while SSR Realty Advisors earlier this year placed two Financial District buildings, 100 Franklin St. and 211 Congress St., on the market in
The sale of the 36-story One Lincoln St. early in the year may prove to be the largest real estate transaction of 2004 in the city, but many of the Boston properties available are small to mid-sized office buildings that seem to meet the bite-sized appetite of the investment community. Portfolio diversity may be one reason, according to observers, while others maintain that buildings under 100,000 square feet offer reasonable upside without a major amount of risk accompanying the purchase.
Investment brokers are also welcoming signs that the worst may finally be over for the region’s business sector, foretelling a subsequent improvement down the road for commercial real estate. According to Meredith & Grew, Boston enjoyed 256,000 square feet of net absorption in the first quarter, with particular strength in the Class A segment. Most of that volume came from the addition of 100 Cambridge St. to Boston’s office inventory, with that building coming on line in the first quarter 75 percent leased, but Meredith & Grew concurred that the Bay State’s economic climate does appear to be on the mend. That could mean eventual stability for office rental rates, which still fell in the first quarter. Meredith & Grew reported that the Class A weighted average asking rent in Boston fell from $35.83 per square foot at year end 2003 to $34.85 per square foot after the first quarter.
