Morgan Stanley’s real estate investment branch is reported to be the buyer of a two-building complex at 225 and 235 Presidential Way in Woburn’s MetroNorth Corporate Center.
As 2004 kicks into high gear, sales of Boston-area office buildings show no signs of slowing, with Morgan Stanley said to be purchasing a two-building complex in Woburn from National Development while a pair of Waltham properties have been acquired by a Chicago-based investment firm for $22.5 million.
Even as those deals wrap up, new product is quickly hitting the market to appease a surge of aggressive capital. According to industry sources, 116 Huntington Ave. in Boston’s Back Bay is now being shopped by its owners, the New Boston Fund. The move caught some observers by surprise given that NBF only purchased the asset in December 2002, but others said the savvy firm is merely trying to take advantage of a white-hot investment climate, especially for strong office buildings.
“My sense is they feel there is a lot of capital looking for product and not a lot of good quality stuff on the market, so why not see what happens?” said one broker. The source also claimed that Trammell Crow Co. has been tabbed to sell the building for NBF after having brokered the purchase to them from American Tower Corp. barely 18 months earlier.
“It’s a great time to sell,” said another Boston broker, particularly with the prospect of rising interest rates becoming more likely as the year progresses. NBF is said to be asking $85 million for the building, a figure the source opined “seems a little high” in the current environment. At the same time, the source acknowledged the willingness of buyers to pursue quality properties enough to push pricing upwards. One potential drag on 116 Huntington Ave., however, is the existence of a ground lease with the Massachusetts Turnpike Authority, a restriction that can limit the investor universe.
As for the Woburn sale, sources reported that Morgan Stanley’s real estate investment arm is purchasing the two properties on behalf of a client. “They are the ones,” maintained a source who estimated that the assets are trading for about $70 million, and with a capitalization rate in the 6 percent range. If so, that would be dramatically lower than the cap rates seen for other suburban office properties, with double-digit rates not uncommon for that sector given the market’s recent difficulties.
Market ‘Foray’
The difference in Woburn, according to observers, is the long-term lease in place with Raytheon for the entire 435,000 square feet contained in the conjoined structures. Inked in late 2003, the 10-year lease was among the largest ever struck in suburban Boston, and solved a dilemma for National Development, which had constructed the properties at 225 and 235 Presidential Way for now-defunct Genuity Inc. National then moved to sell the state-of-the-art buildings, hiring Cushman & Wakefield to take on the assignment. Calls to National Development and Cushman & Wakefield to discuss the sale were not returned by press deadline, while efforts to contact Morgan Stanley officials were also unsuccessful.
Regardless, sources identified Morgan Stanley as the victor in the pursuit of the Raytheon buildings, with one source saying that the investment client may be from overseas, possibly Germany. That would be intriguing if true given a traditional reticence among German investors to buy suburban office buildings. “It’s a very stable asset,” one source said in explaining why that geographic barrier may have been breached in the Woburn deal.
A few miles south on Route 128, Transwestern Investment Co. purchased 2 and 3 University Office Park in Waltham from Cornerstone Real Estate Advisors. Totaling 278,000 square feet, the acquisition marks Transwestern’s arrival onto the Greater Boston real estate scene. The deal was negotiated by Elizabeth Thomas and Phil Giunta of CB Richard Ellis/Whittier Partners. The purchase comes just as the Waltham market begins to recover from a prolonged slump, with Spaulding & Slye Colliers reporting a slight boost in net absorption during the first quarter of 2004, although the Waltham market still has an 18.4 percent vacancy rate.
“We’re pleased to have been involved with Transwestern’s foray into this market,” said Thomas, adding she believes that the purchase is a good sign of how highly outside investors regard the Greater Boston area.
“They are making a bet on the office market recovery in the suburbs, and through aggressive and creative leasing over the short- to mid-term, they feel confident that they are going to add value to this marquee property,” Thomas said.
As for 116 Huntington Ave., brokers spoken with said they believe the property will receive considerable attention among potential suitors. The 11-story building has sold several times already since opening in 1990. In 1994, a Vermont firm bought the building for $23 million, while American Tower Corp. paid $55.2 million in 1994 before selling the structure to NBF.
A call to New Boston Fund were not returned by press time, while Trammell Crow principal James McCaffrey was unavailable for comment.
