Berwind Property Group has acquired the three-building, 278,000-square-foot Highwood Office Park in Tewksbury for $24 million.
Score one for Tewksbury. Despite a location in the heart of the battered Interstate 495 North submarket, the city’s Highwood Office Park has been sold, with Philadelphia-based Berwind Property Group closing last week on the three-building, 278,000-square-foot complex. The savvy real estate investment firm, which has a significant stake already in the region, acquired the park from ELV Assoc. for $24 million, or about $86 per square foot.
“I think they are going to do extremely well there,” said Trammell Crow Co. principal Peter Joseph, whose investment sales team brokered the sale, one of three major transactions his firm has recently completed in suburban Boston. Trammell Crow also wrapped up the $29 million transfer of 130 Royall St. in Canton to Conroy Development and, a bit earlier last week, negotiated New Boston Fund’s $15.1 million purchase of a Westborough office building from the RREEF Funds.
Berwind Chief Operating Officer Arthur P. Pasquarella told Banker & Tradesman that his firm is mindful of I-495 North’s prolonged real estate market woes, brought on largely by the struggling technology sector, while last summer’s departure of Aetna Insurance from One Highwood Drive has left the property with an occupancy rate of just 43 percent. Nonetheless, Pasquarella was upbeat about the deal, citing the park’s close proximity to Interstates 93 and 495, indications of better economic times ahead and Highwood’s reputation as one of the area’s better addresses.
“Quality sells even in a down market,” said Pasquarella, whose firm specializes in value-added real estate opportunities, allowing it to generate greater returns. Best known locally for its impressive turnaround of the 3Com corporate campus in Marlborough into a fully occupied multi-tenanted building, Berwind now owns four office properties north of Boston, including the recently acquired Ferncroft Corporate Center in Middleton and 8 Federal St. in Billerica.
Pasquarella, whose firm has holdings in 29 states, said Greater Boston remains behind much of the country on the economic front, but stressed there are signs that the Bay State is on the mend. Berwind Vice President Albert J. Corr, who oversees the local portfolio, said that showings and requests-for-proposals at Highwood Office Park and throughout I-495 North have risen of late, with the first quarter of 2005 more robust than the start of last year.
“We feel pretty comfortable that the market is improving,” said Corr. “Things are much better than they were even six months ago.”
The Highwood deal was completed for Berwind’s sixth real estate investment fund, in which it raised more than $380 million in equity to concentrate on value-added deals across a spectrum of product types. Berwind also acquired 690 Canton St. in Westwood in 2003 as part of Fund VI. The firm is already preparing to launch its seventh investment fund later this spring, for which it has amassed $540 million in equity, according to Vice President Holly T. Reynolds. Offering a quick three-year horizon, the seventh vehicle will be a closed-end, commingled fund, Reynolds explained.
‘Smart Buy’
While expressing optimism that Highwood Office Park will improve its occupancy in the coming months, Paquarella also said Berwind acquired the property at a substantial discount to replacement cost. The newest of the three buildings, One Highwood Drive, would cost $175 per square foot to build today, Pasquarella estimated. Joseph also praised the quality of the asset and its upkeep by ELV Assoc., which developed the 100,000-square-foot One Highwood Drive in 1999.
Given its hands-on approach to real estate and knowledge of the region, Berwind was a logical candidate to win the competition for Highwood Office Park, said Joseph, whose firm began marketing the asset last summer. Joseph praised the new owners for recognizing the development’s upside and moving quickly to secure the park once it went under agreement. “They were great to deal with,” said Joseph, adding, “I think it’s a smart buy.”
Joseph joined Trammell Crow principal James F. McCaffrey and Chris Phaneuf in brokering the sale of the Tewksbury property, with that same team also handling the sale of 130 Royall St. by the Lone Star Funds to Conroy. Leased entirely to Allied Domecq, the parent company of Dunkin’ Donuts, 130 Royall St. was initially developed by Lone Star and Conroy before the latter firm was bought out following the building’s construction. Conroy has now repurchased the property back from Lone Star.
Joseph declined comment on the intricacies of those moves, but said he believes Conroy’s knowledge of the 178,000-square-foot property helped the Stoughton-based firm emerge victorious in the latest bidding competition, which produced 10 serious candidates. Single-tenanted, net-leased facilities are particularly in vogue at present, said Joseph, who also reported a solid response to the Westborough building purchased by New Boston Fund.
“We had a lot of interest in that one,” said Joseph of 2 Technology Drive, which traded for about $149 per square foot. While sole tenant American Superconductors has less than five years remaining on the lease, Joseph said he believes New Boston Fund was sufficiently comfortable in the building’s quality and the prospects of a recovery to make the investment.
As for Highwood Office Park, Berwind also announced last week that it has retained Meredith & Grew Oncor to serve as leasing and management agent of the complex. Meredith & Grew Vice Presidents David J. Pergola and Matthew S. Adams will handle the leasing assignment, said Corr, who praised the pair for their recent performance at another Berwind property in Wilmington.
“I think they are the best team for us out there,” said Corr, who forecast good times ahead for Highwood Office Park, even with Spaulding & Slye Colliers placing the current availability rate for the 9.9 million-square-foot I-495 North office market at 30.3 percent. Given Berwind’s track record of successfully repositioning troubled assets, coupled with the park’s potential, Corr said he is confident in the long-term prospects. “It’s great real estate,” he said, adding, “It’s going to be a fun one to work on.”
