In what one real estate executive called "a match made in heaven," Millennium Partners has agreed to purchase the Boston Design Center from Vornado Realty Trust.
While a purchase price for the 550,000-square-foot property in Boston’s Marine Industrial Park is unknown, multiple industry sources told Banker & Tradesman it will be between $65 and $80 million.
"It’s newsworthy because it’s big," Ben Sayles, a director at Holliday Fenoglio Fowler, said about the transaction. "It’s unique in the tenancy with a lot of home design companies. But there are not many traditional office tenants."
The transaction is part of a larger portfolio sale by Vornado that includes properties in Los Angeles, Washington, D.C., and Canada.
The Davis Cos. acquired the design center for $34 million in 1999, according to the company’s website. The real estate firm took out a $70 million-plus loan on the property. Vornado then bought the design center in 2005. Vornado paid $24 million in cash and used a $72 million mortgage to cover the remainder of the purchase price of $96 million. Jon Davis, head of the Davis Cos., said Millennium would probably not buy the building for much more than the debt.
According to a statement on the portfolio sale, "Net proceeds will be approximately $144 million after closing costs, $67 million of indebtedness on the Boston Design Center and income taxes on the gain on the sale of the Canadian Trade Shows [properties]."
The design center is a wing of a 1.7 million-square-foot building on Drydock Avenue owned by the Economic Development and Industrial Corporation of Boston, a division of the Boston Redevelopment Authority. A ground lease exists for the design center and two other wings of the property. Millennium now owns all three ground leases.
The deal was likely off-market since Vornado and Millennium already have a partnership in Boston’s Downtown Crossing, said a source that asked for anonymity due to a conflict of interest. Millennium took over the project to redevelop the former Filene’s department store site from Vornado, which was the original developer but is now merely an investor in the project.
That happened after Vornado got on the wrong side of Boston Mayor Thomas Menino after the developer demolished the Filene’s building in the heart of the city’s shopping district and let the site languish as an empty lot for several years. Vornado, of New York, owns a 20 percent stake in Suffolk Downs, the East Boston racetrack vying for one of the state’s casino licenses, according to the source.
"It was a marriage made in heaven," said the source. "Vornado is strategically repositioning the Filene’s site in order to improve their position in regards to the casino in Eat Boston, and at the same time they’re trying to get out of the design business, so this was a perfect way to put a bunch of pieces together. Here they were already working with Millennium on another big project, so it made sense to talk about what other business they could do together."
