Beacon Capital Partners’ $77.3 million acquisition last week of 116 Huntington Ave. in Boston’s Back Bay neighborhood is the latest example of the city’s hot commercial real estate market.
Speed in the personage of right fielder Dave Roberts proved essential to the Boston Red Sox succeeding in 2004, but a palpitating pace is apparently not as critical in the commercial real estate sales market.
Although many deals have proceeded swiftly in 2004, others have required months to consummate, especially for assets such as vacant office and flex properties wallowing in distant suburban locales. Enhanced due diligence and haggling over capital improvements or rental rosters also can slow negotiations, or in some cases, quash agreements altogether. But while investment sales professionals often have to fight to keep deals proceeding along, especially amid difficult economic times, Massachusetts appears destined to have a record year for commercial property transactions.
The latest example of Boston’s hot market came in last week’s acquisition of 116 Huntington Ave. in Boston’s Back Bay neighborhood by Beacon Capital Partners. First reported by Banker & Tradesman in September, the deal closed last week at a price tag of $77.3 million, with New Boston Fund trading the 14-story, 265,000-square-foot office building for nearly $10 million more than it paid less than two years earlier.
“It was a great deal for everyone,” said Trammell Crow Co. principal Peter Joseph, whose firm brokered the sale on behalf of New Boston Fund. “We’re thrilled to have gotten it done.” Joseph joined principal James F. McCaffrey, Senior Vice President Chris Phaneuf and Senior Associate Jordan Berns in negotiating the sale, which Joseph said is the largest single-asset deal Trammell Crow has brokered thus far this year.
The substantial hike in pricing on 116 Huntington Ave. came following an active leasing campaign that has brought the 13-year-old building to full occupancy and coincided with the investment market’s growing ardor for stabilized properties. According to Joseph, New Boston Fund “created a lot of value in the asset, and decided now was the best time to harvest their gains.”
Other Sales
Although sources have claimed repeatedly that 116 Huntington Ave. was taken off the sales market at one point during the summer after an attempt to sell the property to ING/Clarion failed to materialize, Joseph disputed such reports. Any perceived delays were caused by a normal sales process between Beacon and New Boston Fund, he said, and not due to a lack of investor interest or because of any difficult negotiations. The parties could have closed much earlier, but opted to wait until last week for mutually beneficial reasons, added Joseph, although he declined to elaborate.
In any event, with the 116 Huntington Ave. deal finally completed, Trammell Crow is busy trying to tie up a few other sales before year’s end, said Joseph. Members of the firm’s Investment Sales Group also seem unwilling to give up on another high-profile asset they had been marketing during the summer, that being Boston’s 160 Federal St. Owners Invesco Real Estate Corp. and Taurus Investments have indicated that the 24-story tower is no longer for sale, reportedly due to lackluster investor interest that some attribute to substantial vacancies, but Trammell Crow brokers say they are hopeful a sale will ultimately be pursued.
Whether any deal will transpire remains to be seen, but the pending disposition of Two Liberty Square in Boston’s Financial District might provide a measure of optimism for other commercial real estate deals in limbo. Several months after owners Edwards Day Investments pulled the 8-story property off the sales block while addressing an internal loan dispute, Two Liberty Square is under agreement to ELV Assoc. The Boston headquarters of Putnam Investments, Two Liberty Square is expected to change hands in early 2005, according to sources familiar with the deal. The sale, initially reported in last week’s Banker & Tradesman, is being brokered by Spaulding & Slye Colliers.
Principal Michael G. Smith of Spaulding & Slye Colliers declined to discuss the status of Two Liberty Square, but said his firm’s investment sales team is juggling several assets as the 2004 sales campaign enters its final month. “We’re just trying to get what we can done,” said Smith, a sentiment echoed by other industry colleagues.
Many firms are already anticipating that certain assets will not close by Dec. 31, including several that have been put up for sale in the latter half of 2004. Cushman & Wakefield of Massachusetts, for example, is only now gearing up its marketing of the Bay Colony Corporate Center in Waltham, a four-building, Class A office complex expected to attract widespread interest. Trammell Crow, meanwhile, has more than a half-dozen properties it is marketing that will not sell until the New Year, said Joseph.
Such carry over is normal, according to observers. Indeed, some sales efforts can extend indefinitely, as in the case of One Beacon St., the 41-story Boston office tower that last month fetched $340 million from a New York investment group. Brokered by Cushman & Wakefield of Massachusetts, the sale by Prudential Real Estate Investors and Westbrook Partners transpired nearly three years after the 1.1 million-square-foot building originally hit the trading block, with a variety of leasing and regulatory issues helping to drag out the process.
Joe Clements may be reached at jclements@thewarrengroup.com.
