Cushman & Wakefield’s Thomas L. Collins (left) and Robert E. Griffin Jr. (center) chat with Arthur Margon, principal at Rosen Consulting Group of New York, at C&W’s annual Top O’ the Market event presented last week at Quincy Market in Boston.
“Thank You, Mr. Flatley.”
Conveying that message last week in its annual slide presentation of major commercial real estate sales, Cushman & Wakefield underscored how critical industry icon Thomas J. Flatley’s apartment portfolio transaction was for the Bay State’s investment market in 2002.
“That one deal certainly helped,” acknowledged C&W principal Edward C. Maher Jr. At $500 million, Flatley’s disposition of 4,200 apartment units in the region headlined C&W’s Top 25 list, a ranking the firm’s investment sales team has tracked for the past eight years. The tally was unveiled last Friday before an estimated 250 guests at C&W’s lively Top O’ the Market presentation at Quincy Market in Boston.
With Flatley’s deal included in the list, the $2.2 billion sold last year was better than the $2 billion volume attained for the top 25 sales of 2001, but well below the high-water mark of $3.1 billion recorded in 2000. Were it not for the Flatley apartments’ mid-summer sale to a Denver real estate investment trust, volume would have slipped back to the $1.7 billion level registered in 1997.
Although investment interest in real estate continues to be strong, Maher said sales activity was dampened in 2002 because buyers were reluctant to pursue opportunities containing short-term difficulty.
“Anything that has a hint of risk is going to be a hard sell,” said Maher. As a result, he said, investment activity was “bifurcated” last year, with certain assets garnering substantial attention and others being coldly shunned. Cambridge and suburban office buildings were absent from the top 10 deals, for example. “That’s very unusual,” Maher said.
‘On the Mark’
Runner-up to the Flatley sale was One Boston Place, the 41-story office tower in Boston’s Financial District acquired by Teachers Insurance and Annuity Association and a Canadian partner. The 800,000-square-foot building sold for $267 million.
Six of the 10 top deals were for Boston office buildings, with the $133 million sale of Lafayette Corporate Center placing third, followed by 501 Boylston St. at $122.6 million. The $109 million sale of 50 Milk St. to an Australian investor was sixth largest, CB Richard Ellis Investors ranked seventh with its purchase of 101 Arch St. for $89 million, and the $82 million acquisition of 470 Atlantic Ave. (aka Independence Wharf) by General Electric Capital garnered ninth place.
At fifth largest, the $119 million sale of the Silver City Galleria in Taunton was the only retail asset making the top 10, which was rounded out by a pair of multifamily deals. Waltham’s Gardencrest, a 696-unit apartment complex, was eighth largest at $85.7 million, followed by Longwood Towers in Brookline, a 268-unit property that fetched $80.2 million. That acquisition by TIAA was 10th largest of the year.
In his presentation, C&W New England President Robert E. Griffin Jr. concurred that 2002 was an off year, but also stressed that “there is still more money out there than there has ever been in the past.” As Maher noted, Griffin said particular asset classes are stronger than others. “Apartments absolutely took off” in 2002, he said, with capitalization rates for some deals falling into the 6 percent range. “That’s unprecedented,” said Griffin. The Longwood Towers sale was another indication, with its $298,000-per-unit price tag the highest ever locally for an apartment property of that size.
Efforts to retrade deals in the latter stages of negotiations have been on the increase, and Maher said that trend indicates sellers have to be realistic. “The key to succeeding in this market is pricing things right,” he said. “It has to be on the mark.”
As for brokering sales, Meredith & Grew handled the Flatley negotiations, while Spaulding & Slye Colliers oversaw the One Boston Place disposition. Principals John Hennessey and Donald Hause of GVA Thompson Doyle Hennessey & Stevens brokered the blockbuster purchase of 501 Boylston St. by Beacon Capital Partners, a multi-pronged deal that appeared suddenly on the industry radar screen late in the year. David Pergola Sr. of Meredith & Grew successfully steered the Gardencrest negotiations through a turbulent process that ended with its purchase by a New York real estate investment trust.
Once again, Griffin’s investment team was well represented in the upper echelon of deals. The team, which had previously been at Trammell Crow before joining C&W in 2001, brokered Lafayette Corporate Center, 101 Arch St., the 470 Atlantic Ave. deal and the Longwood Towers sale. While the group did not reach the $1 billion level it had for several previous years, C&W still outpaced the competition with its $650 million in volume.
Last week’s program was emceed by C&W principal Thomas Collins, while economist Arthur Margon gave an optimistic outlook toward the recovery of the Boston real estate market. And while acknowledging that the region faces economic obstacles in the coming months, Griffin said he expects apartments and grocery-anchored retail will remain popular, as will disposition of corporate assets.
Buyers continue to benefit from record-low interest rates, Griffin said. He also pointed out that the downturn of the early 1990s provided investors with upside rarely attainable since, as in the case of the sale of the Wang Towers to a trio of investors for pennies a square foot. “There are still some great deals to be had,” Griffin said.
