
Longwood Towers, a 273-unit luxury apartment complex in Brookline, is reportedly being purchased by pension fund TIAA-CREF for close to $80 million.
After a spirited competition among investors, pension fund giant TIAA-CREF has reportedly agreed to acquire the luxury Longwood Towers apartment complex in Brookline, industry sources told Banker & Tradesman last week. The 273-unit property is currently owned by Avalon Communities and is expected to sell for slightly less than $80 million, or about $290,000 per square unit.
The sale is just the latest acquisition target by TIAA-CREF, which divested most of its local holdings in the mid-1990s after being a leading financier in Boston’s unprecedented 1980s building boom. In addition to Longwood Towers, TIAA-CREF is in the process of finalizing its purchase of One Boston Place, a 41-story office tower in the Hub’s Financial District.
At this point, TIAA-CREF officials are keeping mum on the situation, with spokesman Steve Greene telling Banker & Tradesman last week that the New York-based group’s policy “is to not comment on our real estate buying or selling situations.” Cushman & Wakefield New England President Robert E. Griffin Jr., who is brokering the sale on behalf of Avalon, declined to identify who is buying Longwood, although he did acknowledge it is under agreement. In any event, several sources tabbed TIAA-CREF as the suitor.
“They are absolutely the ones” purchasing Longwood Towers, insisted one source. With $260 billion in assets under management and 2.5 million plan participants, TIAA-CREF apparently had the heft to outlast its competition. While he would not discuss specifics of the sale, Griffin said more than 50 groups registered for market information and 20 of them actually made bids. “It was a dogfight right to the end,” said Griffin. Part of the reason was due to general interest in multifamily opportunities, he said. Longwood attracted particular ardor for its location in upscale Brookline and the overall quality of the complex, which fetches as much as $4,800 per month for some apartments. “That asset was so hot it was unbelievable,” Griffin said
If the deal is consummated, it will be just the latest high-profile transaction brokered by Cushman & Wakefield’s investment team in recent weeks. The company is also in the process of wrapping up the sale of the Cross Point office park in Lowell and One Beacon St. in downtown Boston, which is being acquired by Connecticut-based Broadway Partners LLC. That transaction was first reported last week on Banker & Tradesman’s Web site, www.BankerandTradesman.com.
Some sources told Banker & Tradesman the per-square-foot price of One Beacon St. is closer to $330 than the $339 previously indicated, which would bring the sales price of the 1.1 million-square-foot tower into the $335 million range. The owners, Prudential Real Estate Investors and Westbook Partners, had initially been asking $345 million.
Again, Griffin would not comment on any of the deals Cushman & Wakefield with which is involved, but he did stress during a market presentation last week that most investors are seeking a pricing discount when buying properties in the depressed environment and explained that closing a sale is as hard as it has been in years. In 1998, for example, about 30 percent of all deals being brokered locally ended up in efforts to retrade in the final moments – i.e., to seek a lower price – while 22 percent of the time, the initial buyer walked away completely, which Griffin referred to as “a remount.” This year, the retrades are closer to 70 percent, Griffin said, and another 30 percent result in remounts.
Market Tour
The deal cycle has also expanded, said Griffin, from an average of between three and six months to now as long as six months to a year. Indeed, the TIAA-CREF purchase of One Boston Place has lingered for months, although broker Jeffrey Swartz of Spaulding & Slye Colliers indicated last week that the long-awaited sale is finally nearing completion.
Griffin gave his remarks last Tuesday as a kick-off to an annual bus tour of Greater Boston’s commercial real estate landscape sponsored by the Massachusetts chapter of the National Association of Industrial and Office Properties. Referred to as “a windshield tour of the market” by committee head Thomas Collins of Cushman & Wakefield, the daylong event known as Seaport2Endzone went from the Hub’s Seaport District to several commercial properties in Boston and the suburbs, culminating in a visit to the new pro football stadium in Foxboro.
Despite good news on the investment front, with Griffin reporting solid activity among buyers looking for commercial properties, he also delivered a dour outlook for the leasing side of the business. Relying on insights from Cushman & Wakefield’s own Boston staff, Griffin said it appears the downturn may be deeper and will last longer than many had previously thought. Indeed, Griffin’s remarks were in stark contrast to a report issued last week by Cushman & Wakefield’s national group that indicated conditions in Greater Boston and elsewhere appear to be on the mend.
One concern, said Griffin, is a number of lease expirations expected to roll over in 2004 and 2005. “I’d be very conservative in that period of time,” said Griffin, adding that it could take as long as 36 months for markets farther out of the inner core to rebound. Even with negative absorption numbers finally appearing to tail off, Griffin noted that rental rates are still eroding. In Cambridge, for example, the average rental rate has fallen in the past year from $47.79 per square foot to $40.59, while the MetroWest market is down from $29.58 per square foot to $24.59 per square foot. Downtown Boston rents are off from an average of $50.31 per square foot a year ago to $39.46. “It’s going to be a rough ride here for awhile,” said Griffin.
Even with the continued difficulties, however, Griffin said investment activity has remained brisk throughout 2002, as witnessed by the swath of deals Cushman & Wakefield is handling.
As indicated in the Longwood Towers fervor, Griffin said multifamily continues to attract the greatest attention, while suburban offices have largely been ignored unless they possess a strong tenant roster.
As for Longwood, if the deal makes it to the finish line, it will represent a remarkable upside for Avalon, which acquired the property in 1993 for just $16.5 million from Children’s Hospital. The three-tower complex, constructed in 1926, is located at 20 Chapel St., just a few blocks from Boston’s Longwood Medical Area.