Cushman & Wakefield of Massachusetts’ marketing of 350 Washington St. in Boston’s Downtown Crossing section should land among the retail industry’s top deals of 2004.
A Miami real estate investment trust with a growing appetite for Northeast retail properties has agreed to acquire a half-dozen grocery-anchored shopping centers in Massachusetts, according to industry sources. The 390,000-square-foot portfolio carried a price tag of $120 million when put up for sale earlier this summer by brokers at CB Richard Ellis/Whittier Partners.
Equity One Inc. is reportedly conducting due diligence on the properties, which are located in Cambridge, Medford, Plymouth, Quincy, West Roxbury and Swampscott. Ranging from 36,000 to 100,000 square feet, the centers are owned by Crosspoint Assoc. and Charlesbank Capital Partners.
Calls to Equity One officials in their Miami headquarters were not returned by press deadline. CBRE/Whittier principal Chris Angelone declined to discuss the negotiations, which he and colleague William Moylan are orchestrating on behalf of the sellers. Nonetheless, sources insisted that Equity One has been selected as the buyer of the portfolio, an opportunity said to have drawn considerable attention from potential investors.
The transaction is occurring at a time when retail assets have become among the most coveted classes of commercial real estate, with a surge of domestic and overseas money put off by the stock market and other weak investment options now chasing a limited supply of centers, with New England particularly bereft of investment-grade assets. “There’s a ton of unfulfilled demand,” acknowledged William J. Beckeman of Linear Retail Properties. “There’s a lot of capital that would get placed if they could find the right deal.”
Beckeman’s firm, which last week changed its name from Pivotal Properties to reflect its focus on retail, has acquired three Bay State centers since its inception last September, most recently a 28,000-square-foot complex on Route One in Danvers and another in Fall River. Seeking to purchase upward of $200 million over a three-year period of “convenience-oriented retail,” Linear has found the pace a bit sluggish, said Beckeman, who still predicted the firm ultimately will meet its goals. “We’re starting to see some good deal flow,” he said, apparently fueled by owners finally being attracted by the aggressive capital.
“We’re making offers every week,” said Beckeman, whose firm is now setting its sights on Rhode Island along with the current focus on Massachusetts and southern New Hampshire. Spaulding & Slye Colliers principal James M. Koury concurred that inventory is the only roadblock from having retail sales explode. “Pricing is at historic highs, but there just isn’t much product available,” said Koury, who expects a normal year for Spaulding & Slye’s retail investment sales group in 2004, with between 22 and 26 centers likely to be traded by year’s end.
The firm earlier this year brokered the sale of the Shops at Solomon Pond in Marlborough, fetching $270 per square foot for the 101,000-square-foot asset. Spaulding & Slye currently has seven centers in New England under agreement, said Koury, with sizes ranging from 120,000 to 530,000 square feet. The firm is just now bringing to market a portfolio of five freestanding CVS drugstores located from New Jersey to Georgia. Also, a 140,000-square-foot center in West Hartford anchored by a Shaw’s Supermarket will carry a $23 million asking price, said Koury, who has been selling retail assets for more than two decades. Investors looking to complete tax-free exchange real estate deals may be attracted to certain smaller opportunities, he said, with that so-called 1031 program said to be especially active in 2004.
‘High Demand’
Cushman & Wakefield of Massachusetts also has moved to take advantage of the retail furor, and the firm’s marketing of 350 Washington St. in Boston’s Downtown Crossing shopping district will land among the industry’s top deals of 2004. The multi-level, 155,000-square-foot center fetched $110 million, or more than $700 per square foot, when it was purchased by a foreign investor last month.
Several international buyers pursued 350 Washington St., said Cushman & Wakefield Senior Director Geoff Millerd, who added that pension funds and real estate investment trusts are equally enamored by local retail fundamentals. Geographic limitations and development hurdles have kept the region under-built in store space, said Millerd. “It’s a very difficult market to buy in,” he said, but that has apparently done little to keep investors from abandoning their strategies.
“New England is in very high demand,” said Millerd. One recently formed partnership between ING Clarion and Federal Realty has expressed strong interest in the Bay State, according to industry observers, while Millerd said he is noticing an increase of unions between institutional capital and REITs aiming to target the retail arena. In a plan unveiled last month, Federal Realty and ING Clarion intend to acquire up to $350 million of grocery-anchored centers between the East Coast and California markets during the next 24 months.
Among the new arrivals is Equity One, which is located primarily in the southern United States where it has a 20.7 million-square-foot portfolio dominated by retail. The firm has 10 drugstore-anchored shopping centers, 128 grocery-anchored centers and another 44 retail properties, as well as four retail development projects. Sources claimed Equity One officials have openly expressed an interest in the Massachusetts market, and reportedly hope to make the Crosspoint/Charlesbank deal their inaugural purchase in the state.
Equity One sees the portfolio “as a good base to build around,” said a source familiar with the company. “They love this market,” claimed the broker, maintaining that the REIT is actively pursuing other retail properties in Massachusetts besides the Crosspoint/Charlesbank offering.
Joe Clements may be reached at jclements@thewarrengroup.com.
