A New York City-based real estate investment firm and its local partner have purchased the Great Woods Office Park in Mansfield for $5.4 million.
The Praedium Group, a New York City-based national real estate investment firm, partnered with Andover-based Essex River Ventures to purchase the nearly 60,000-square-foot, two-building Great Woods Office Park in Mansfield last week for $5.4 million. The sale marks the first Massachusetts property for Praedium and the beginning of a campaign to acquire more than $100 million in Greater Boston assets over the next year.
Praedium, which closed on a $465 million real estate private equity fund, will be acquiring $1.5 billion in properties across the country and Canada. The fund plans investments in assets in the $10 million to $70 million range, according to fund managers. In May, the company closed on a $6.1 million property in Salem, N.H.
Philip Tager, director of Praedium, said that given there are early signs of a real estate market recovery, he expects that the next 12 months will bring interesting investment opportunities.
“We’ve been on the sidelines because, in our opinion, property values [in Boston] have been too high but they are starting to come back down to a level that provides good investment opportunities. The attractiveness will only get better,” he said. “Right now, we’re essentially nibbling on deals smaller than our target size but in the next few months we will be pursuing deals in the $30 million range and up.”
Praedium targets multifamily, office, retail and industrial property types that offer so-called value-added opportunities – properties that can be improved to maximize income potential. Tager said that the Mansfield deal fit the company’s profile because of its solid cash flow and the property’s adjacent parcel, which would allow the company to increase the square footage by about 50 percent with a future development.
The buildings had another appeal; the properties are leased to a strong roster of small tenants in a market predominately driven by larger tenants.
“The appeal is that, over time, these assets – because of their small-tenant nature – have shown a good resilience to the ups and downs of the overall market and remained very well leased,” said Darryl Asack, vice president with the market capital group at the Boston office of Spaulding & Slye Colliers. Asack represented the seller, Sebonic Partners, in the transaction. “Their performance had a broad appeal to investors who had the ability to take advantage of very favorable financing because of the building’s multi-tenant characteristics.”
Sebonic Partners received more than 10 bids for the buildings, according to Asack.
‘Outside the Mainstream’
The buildings haven’t always had a high occupancy rate. About two years ago the properties fell victim to the collapse of the telecommunications sector, which dropped the occupancy rate into the low 80 percent range. However, Asack said that Spaulding & Slye, the building’s assigned leasing team, brought that rate up to 90 percent in a short amount of time.
“That played very well with investors,” he said.
Tager said that the average office size at the Great Woods Office Park – 2,500 square feet – makes it somewhat unusual for the area and that, coupled with its location midway between Boston and Providence, R.I., makes it stand out in some investors’ eyes.
The Great Woods Office Park is Praedium’s second deal with Andover-based Essex River Ventures, a real estate and investment and asset management firm that was formed in late 2002 by President John Fenton and Robert King. The company focuses on many of the same type of properties that Praedium targets – buildings that need cosmetic work, renegotiated leases or more active management.
“Institutional real estate is highly valued,” Fenton said. “But [that strategy] overlooks a whole class that’s a little outside the mainstream because of its size or if it’s not leased to the right tenants.”
As the commercial market cycle hits the bottom locally, there are more investment opportunities available, Fenton said. Investors typically are looking for two main categories – well-leased, stable assets for which they’re willing to pay a premium, and underperforming real estate that, with some level of improvement to the property, has the potential to realize higher rents or greater occupancy. Fenton said his group focuses on properties with some steady income that can be purchased at a good price and then improved by management.
“A lot of owners are able to hang on [during a market slump] but they may realize that they’re not able to hang on much longer and sell for a reasonable price,” he said. “Then we’re able to buy it right and reposition the buildings as the market recovers.”
Fenton said that the Great Woods Office Park was somewhat overlooked by a lot of larger investors, a situation that increased Essex River Ventures’ interest in the property.
Great Woods Office Park was built in 1981 and expanded in 1986. The property, located at 792 and 800 South Main St. consists of two office buildings, one a two-story building and the other a three-story structure, totaling 58,000 square feet. The deal also included a potential development site on an adjacent parcel that could support a 28,880-square-foot, three-story office building.
The property sold for $94 per square foot.
Great Woods Office Park is the second venture between Praedium and Essex River Ventures. Earlier this year the firms jointly purchased Manor Parkway, a three-story building office/ flex property in Salem, N.H.
The Praedium Group is a real estate investor focusing on underperforming and undervalued assets throughout North America, with more than $2 billion in total investments to date. Praedium was formed in 1991 with a leading international investment bank as its sole investor. Praedium has been a sponsor of real estate private equity funds since 1994. The funds sponsored by Praedium have attracted investors that include public and corporate pension funds, financial institutions, insurance companies and endowments.
