Boston’s 185 Devonshire St., an 11-story, 79,000-square-foot office building, is being acquired by a Miami real estate investment firm that plans to maintain its current use.
Boston’s 185 Devonshire St. will not be going home. After being mulled as a potential conversion to residential or even a boutique hotel, the 11-story, 79,000-square-foot office building is being acquired by a Miami real estate investment firm planning to retain the mid-block property for its traditional use. Expected to close this week, the sale to Bayview Financial will mark the fourth time in seven years that 185 Devonshire St. has changed hands, with the highest price at $18.7 million in 2001 by the current seller.
Although it will be below that rate, according to sources, a price for the latest deal was not available by Banker & Tradesman’s press deadline, with efforts to contact Bayview Financial unsuccessful, and broker Elizabeth Thomas of CBRE/Melody Capital Markets declining to discuss that aspect of the deal. According to sources, the latest transaction will involve the purchase of the loan on the asset from PB Capital Corp.
A senior vice president specializing in investment sales, Thomas two years ago helped launch the residential conversion boom in downtown Boston’s office market in brokering the sale of 70-80 Lincoln St. along with colleague Philip Giunta, but the buyers of 185 Devonshire St. are seemingly satisfied that it is well positioned enough to continue attracting office tenants.
“It is a great location, and with some reinvestment of the property, they are going to do well,” said Thomas, who said hotel operators were well represented in the cadre of suitors vying for the building. Bayview’s approach is similar to what occurred at 18 Tremont St. a few blocks away earlier this year. Also considered ripe for conversion, Meritage Properties of New York instead opted to retain that building as multi-tenanted office space after paying $37 million for the asset.
Built in 1914 and also known as the Unity Building, 185 Devonshire St. has 6,300-square-foot floor plates, a size typically favored by smaller companies prevalent in that eclectic corner of the Financial District. Occupants in the building include a mix of financial, medical and legal tenants, while the street-level retail features Grass Roots Deli and Michael’s Hallmark. Located steps from all of the city’s subway lines, the building is near Government Center, the State House and Faneuil Hall.
‘Considerable Flexibility’
The disposition of 185 Devonshire St. comes at a hyperactive time for investment sales in Boston, with interest fueled by the prospect of conversion to residential, but also an improving outlook for the office sector. In third-quarter figures released last week, Grubb & Ellis estimated that the city posted 385,000 square feet of net absorption in the third quarter, dropping the vacancy rate to 12.2 percent. Two of the submarkets that had been struggling – the Financial District and Fort Point Channel – enjoyed the best performance in the summer months, each topping six figures in absorption levels, according to Grubb & Ellis.
As for office rents, Grubb & Ellis puts the asking rates at $38.39 for Class A space and $26.15 per square foot in the Class B market. While rents are expected to remain relatively flat for the near term, the commercial real estate company predicted that upper-floor rents should begin to rise in the coming months as supply begins to tighten. A dearth of new construction in Boston should allow rates to continue growing, the report added, particularly if the Massachusetts economic rebound is sustained.
Bolstered by such trends, already aggressive capital seems to be picking up its intensity as the final two months of the year begin, typically the busiest stretch for investment sales. According to industry observers, several bidders chased nearby 101 Arch St., a 407,000-square-foot office tower expected to trade for close to $300 per square foot, or about $110 million. Although no official word has yet been provided, ING Clarion Partners has reportedly agreed to purchase 101 Arch St. from CB Richard Ellis Investors, as indicated in last week’s Banker & Tradesman. Thomas is also participating in that sale, but would not discuss the matter or say who might have been tabbed for the 21-story office tower.
Confirming another high-profile rumor, officials at Liberty Mutual Insurance finally acknowledged their intentions to buy 10 St. James Ave. and the adjoining 75 Arlington St. in Boston’s Back Bay from Millennium Partners. The plan was also reported in last week’s Banker & Tradesman, at which time officials at the insurer refused comment. In a subsequent release, however, Chief Executive Officer Edmund F. Kelly announced Liberty Mutual has signed a purchase-and-sale agreement to buy the buildings, which would give his firm ownership of the entire block encompassing St. James Avenue and Arlington, Berkeley and Stuart streets after last year also buying 330 Stuart St.
Kelly said growth in his firm’s operations necessitated the search for additional space. “The purchase, as well as being a good investment, will provide Liberty with considerable flexibility for future expansion of our home base in Boston for many years,” Kelly offered in the prepared statement. Ranked 111th in the Fortune 500, Liberty Mutual has nearly 1,900 employees in the Back Bay, and already occupies about 100,000 square feet in 10 St. James Ave. and 75 Arlington St.
Kelly and Millennium Partners officials did not divulge financial details of the transaction, or say when they expect the deal to close. Earlier this year, however, the owners had been shopping the assets for a price said to be in the $500 million range. While some claim the figure may have been too rich for an investor, Liberty Mutual’s intentions to use the space could result in a heftier bid, according to observers.
Built in 1913, 75 Arlington St. was refurbished in 2001 in conjunction with Millennium’s development of 10 St. James Ave., a 19-story office building. There is more than 500,000 square feet between the two structures.
