Hobbs Brook Management recently opened the doors to 175-185 Wyman St., a 335,000-square-foot office and lab complex in Waltham. Hobbs Brook broke ground on the speculative project just as the commercial market was entering a nosedive, and builders were throwing the brakes on development projects. And late last year, Hobbs Brook closed on a $37.5 million purchase at Edgewater Office Park in Wakefield. The deal closed in days, at a time when the commercial sales market was largely frozen.
Thomas Dusel, Hobbs Brook’s President and COO, said his firm is willing to build, and buy, when others aren’t because its corporate parent, insurer FM Global, takes a long-term view of its real estate investments.
“Like Ernie Boch, we have no mortgages,” Dusel said. “We’re not subject to the whims of trying to get funding from a financing source or from an investor. We’re not a typical developer that builds it, fills it and flips it. That’s not us. We’re going to own it for the next 30, 40, 50 years. We’ve never sold a building here. This building we’re in now has been here since 1954.”
Thomas Dusel
Title: President and COO, Hobbs Brook Management; Waltham
Age: 55
Experience: 32 Years
What’s it like bringing a speculative building online in an environment like this?
Honestly, most developers would’ve never gotten the funding when we started this project. Our approach to it is, we’re going to own this for a long time. We’re willing to make the investment. We knew there were still large, prominent users out there. We knew we were going to have the most amount of space in the best building in the best location to accommodate those large users, and there are a number of them out there now.
The only thing we’ve been debating now is getting the rent that we want. I don’t have to give this building away, and I’m not going to. I can afford to be patient. I don’t have a lender breathing down my neck. And I don’t want to be saying, two years from now, ‘Why did we ever sign that lease?’ In the long run, I want this to be a good deal for us, but it will also be a good deal for the tenant. Because once the market tightens up, rents have a way of just spiking all of a sudden.
So there are things you’re able to do a typical developer isn’t?
It starts with building a quality product. Some of these buildings in this park are 50-plus years old, and they compete very well with newer buildings. And that’s because they were built well and maintained well. We not only take care of our buildings so they operate reliably and economically, we take care of the occupants so they don’t want to leave. IBM has been a tenant of ours since the beginning. They keep renewing. You spend a lot of money brining a tenant into a building – up to two years of rent when you talk about all the upfront leasing costs and the fit-up costs and the downtime. Where we really make our money is when the tenant renews, and they almost always renew – and, in some cases, expand.
What’s the leasing environment like now, compared to nine months ago?
It has improved in certain markets – downtown [Boston], East Cambridge, here in Waltham. A lot of the businesses in our suburbs are coming out of the incubators in Boston and Cambridge. A lot of venture capital firms have their headquarters here. They’re the engines of growth, and as their business starts to increase, we know the tenant base is going to expand pretty rapidly. We’re seeing that.
Why did you build 175-185 Wyman as a LEED Gold building?
It saves us money, and it saves our tenants money. And it’s good for the environment. We’ve always been interested in conserving resources as a quality-of-life issue. Tenants are paying more attention to it now. The larger companies out there are not interested in your building unless it’s LEED certified. The market demands it.
Can you talk about the buildings in Wakefield you bought last fall?
That was definitely an opportunity we couldn’t pass over. We have a good relationship with the broker representing the property, we had the funding available, and we closed in two days. That doesn’t happen often. The difference is, I didn’t have to go through a loan committee and an investment committee. I talked to three people, and we made the deal. We got it for $110 per-square-foot, versus a replacement cost of $240 per-square-foot. It worked out really well.
Do you think there are more acquisition opportunities coming?
There are still a lot of distressed properties out there. Lenders haven’t reached that need to liquidate yet, but we believe there will be opportunities in the next one to two years. Rents were at $50 or $55, and now they’ve dropped back to the low $30’s. Loans were written at those high rents, and they were looking to go higher. When the opposite happens, and leases are expiring, the borrowers won’t be able to make their payments.
Hoobs Brook’s Top Five Community Investments:
- Waltham Education and Beyond Foundation
- Waltham High School football and youth sports
- Waltham Lions Club
- Waltham Fire Department
- U.S. Department of Veterans Affairs Compensated Work Therapy program
