Brighton-based Intercontinental Real Estate Corp. is said to be asking just over $15 million for the Ames Building, which is located at One Court St. in Boston.
After weaving through Boston’s permitting maze to allow conversion of One Court St. into a hotel, Intercontinental Real Estate Corp. has put the 75,000-square-foot building up for sale. Renowned as one of the country’s first high-rises when constructed in the late 19th century, One Court St. is being pitched both as a potential hotel site and a property that could be returned to its former use as an office building.
Brighton-based Intercontinental has retained CB Richard Ellis/Whittier Partners to market the asset, with an asking price said to be just over $15 million. Intercontinental acquired the property, also known as the Ames Building, in October 1998 for $9.6 million. CB/Whittier hotel specialist David McElroy acknowledged last week that he and colleague David Fitzgerald are heading up the sales program, and expressed optimism that a deal can be completed by year’s end.
Fitzgerald will pursue investors from the office sector, while McElroy will inform his clients in the hospitality industry of the opportunity. Although the city’s hotel market has been battered by the one-two punch of the September 2001 terrorist attacks and the region’s economic slump, McElroy said he believes One Court St. will receive a favorable response from potential suitors. “It is a phenomenal location for a hotel,” insisted McElroy, explaining that an operator could rely on both the business traveler during the week and the leisure market on weekends, with Faneuil Hall and other Boston tourist landmarks just steps away from the building.
The just-completed Democratic National Convention may have provided the city’s hotel sector with a noticeable bump, as did last month’s MacWorld trade show at the new Boston Convention & Exhibition Center, but McElroy also stressed that the recovery began long before those special events took place. Citing the industry standard of revenue per available room, or RevPar, McElroy said Boston has seen a substantial improvement in activity since the beginning of the year. After wobbling in January and February, RevPar was up nearly 19 percent in Greater Boston during March when compared to a year earlier, followed by a 16 percent jump in May and another spurt in the teens in June, said McElroy.
“The Boston market is leaping back to life,” said McElroy, adding that single-digit RevPar is usually considered a healthy occurrence. Although hotel rates have been depressed for a lengthy period, McElroy said he believes the solid start to 2004 could bring some improvement as the year proceeds. That, in turn, should lead to renewed interest from investors for hotel product, said McElroy, who said he has noticed a narrowing of the bid/ask gap that dogged the investment sales market in 2003. Both buyers and sellers have compromised to narrow the chasm, said McElroy, who earlier this year sold another Boston inn, trading the Best Western in Brighton to a Massachusetts investor.
More Hospitality
In declining to provide specifics, McElroy said he has several other hotel properties in various stages of agreement, including a South Shore property that is slated to close within a week. Although a drop in the bucket compared to office building sales taking place during the past two years, McElroy said he believes hospitality properties will garner increased attention as the recovery takes hold, especially as returns on other commercial assets become diluted due to overexuberent investors.
Calls to Intercontinental officials were not returned by press deadline, and McElroy declined to offer any insight as to why the owners opted against pursuing the hotel plan the firm originally envisioned for One Court St., a $35 million project that would have yielded 162 rooms. McElroy also declined to assess whether the building will receive more attention from hotel investors or from those who believe it could again thrive as an office destination. The building’s presence at ground zero of Boston’s Financial District might make it viable as office space, although that market has also been devastated by the region’s lingering economic malaise.
According to Spaulding & Slye Colliers, the Financial District’s office market now has a 13.6 percent vacancy rate, substantially up from the 8 percent registered five years ago when Boston was enjoying the sustained economic boom which carried the region into the new millennium. The future of office space in the Hub has been so bleak since the downturn began in mid-2001 that several older office buildings that have changed hands this year are being repositioned for a residential use. Even so, Boston’s office market has rebounded thus far in 2004, with second-quarter net absorption in the Financial District reaching nearly 700,000 square feet, according to Spaulding & Slye.
Intercontinental acquired One Court St. as part of its $80 million Intercontinental Real Estate Investment Fund II. The fund’s investment strategy, according to Intercontinental’s description, was to pursue new development projects and acquisitions that need repositioning, rehabilitation or financial restructuring, with product type running the gamut from office and industrial to hotels, retail and mixed-use projects. Other properties obtained through that vehicle included 343 Congress St. in Boston’s Seaport District, 226 Causeway St. in the North Station market and 90 Tremont St., a property just around the corner from One Court St. that Intercontinental successfully redeveloped into one of the Hub’s trendiest hotels, the 190-room Nine Zero.
Intercontinental ultimately redeveloped 343 Congress St. into a retail/office building that was recently purchased by a German investor, while the firm sold the top half of 226 Causeway St. last summer for more than $40 million. That former Stop & Shop warehouse was converted to a mix of office and residential units, with apartments grafted onto six floors above the existing structure. It was that portion Intercontinental sold to a Connecticut group that has set about converting the apartments into luxury condominiums. Intercontinental still owns the lower portion of that structure, which has secured some tenants during the past year, including accounting firm Grant Thornton..
Joe Clements may be reached at jclements@thewarrengroup.com.
