Longwood Towers at 20 Chapel St. in Brookline, a three-building, 268-unit luxury apartment complex, reportedly will be marketed for sale to investors with an interest in converting the units to condominiums, a strategy that may help boost the sales price.
It has skirted the condominium craze for several cycles, but the time may have finally come for Longwood Towers in Brookline, with industry sources reporting that the 268-unit luxury apartment complex is being put up for sale in a campaign that will most likely be targeted at converters.
“It would be logical,” one multifamily sales broker said of such an outcome, maintaining that the units could garner between $325,000 and $340,000 per unit, deemed too rich a price to retain as a rental property, even for a destination as desirable as Longwood Towers. At the upper end, Longwood Towers would fetch more than $91 million, well above the $80.1 million paid in December 2002 by the current owners, New York-based pension fund TIAA-CREF. In the previous deal, brokered by Cushman & Wakefield, Longwood Towers sold for $298,000 per apartment, then a record for the Boston area.
According to sources, TIAA-CREF has hired CB Richard Ellis/Whittier Partners to market Longwood Towers after a competition among various real estate investment groups. Calls to CBRE multifamily brokers Simon Butler and Biria St. John were not returned by Banker & Tradesman’s press deadline last week, while officials from TIAA-CREF’s headquarters also did not respond to inquiries. Despite that, sources insisted the asset is being put on the block. “That is the case,” said one source tracking the situation.
Cushman & Wakefield principal Marci Loeber declined comment on the Longwood Towers aspect, but said condominium converters are driving the multifamily sales market at present, with lower interest rates seen as making such units popular among consumers.
Besides a number of other apartment sales last year, Loeber’s firm sold Museum Towers in Cambridge to a Florida company that paid an astounding $145 million for the twin-tower, 435-unit complex, a figure that likely would not have been attained but for the conversion option. The company, Crescent Heights of Miami, immediately reflagged the property as the Regatta Riverview Residences and has been selling units there since last summer for prices expected to reach nearly $700,000 per unit. Museum Towers was constructed in 1998 by developer Dean Stratouly before being purchased by ING/Clarion in 1999 for $110 million. Crescent Heights has another apartment property in the East Cambridge market that it is converting to condominiums, as well.
Located at 20 Chapel St. near the Longwood Medical Area, Longwood Towers features three buildings that were built in 1926. If a sale does ultimately go through, it will be the third time in 12 years that the complex has changed hands, with AvalonBay Communities paying just $16 million for the property in 1993 before selling it to TIAA-CREF in late 2002. A Virginia-based real estate investment trust sporting several apartment holdings in Massachusetts, AvalonBay had conducted an extensive overhaul of Longwood Towers in the late 1990s, helping bring monthly rental rates to nearly $5,000 per unit.
Joining the Crowd
When TIAA-CREF acquired Longwood Towers, the region’s rental market was near its peak, apparently enough to encourage TIAA-CREF to keep the property as apartments. Rental vacancies have since been on the rise in Greater Boston, partly due to homeownership opportunities fostered by low interest rates. Loeber said converters have been focused on the market for an extended period, adding that her firm anticipates such players will pursue a number of multifamily properties that Cushman & Wakefield’s Financial Services Group is about to begin marketing.
Given the solid interest for apartment deals, Loeber said she believes other owners may look to test the market’s waters in the coming months, but said the inventory of units up for sale has not been unlimited. “There’s a good amount [of multifamily properties available for purchase], but I wouldn’t say there’s a ton of it,” said Loeber, whose firm has also been active selling other commercial real estate assets, including office, industrial and retail buildings.
If Longwood Towers does indeed go the condominium route, it would be just the latest upscale apartment development in the area to undergo a conversion plan, including two recent buildings in Allston and downtown Boston acquired by J.S. Karlton Co. In the latter deal, the Connecticut-based firm paid more than $40 million for 108 apartments in the Hub’s North Station district in 2003, then renamed the six-story development Strada234. The firm has sold some units at Strada234 for more than $1 million.
As with Cushman & Wakefield and other local real estate investment specialists, CBRE/Whittier’s multifamily sales group has been active selling Massachusetts apartments in recent months. Most recently, Butler and St. John brokered the sale of Cliffside Commons in Malden, a 295-unit Class A apartment property just off Route 1. The property sold for $55.4 million. According to CBRE/Whittier, the firm’s Northeast multi-housing team has now brokered the sale of nearly 3,500 units since January 2004, with total consideration in excess of $416 million.
