Paradigm Properties has landed buyers for three office buildings in downtown Boston, including the real estate investment firm’s own headquarters at 31 Milk St.
After months of effort, Paradigm Properties has found buyers for three office buildings in downtown Boston, including the real estate investment firm’s headquarters at 31 Milk St. Combined, the properties are expected to fetch more than $60 million.
The largest of the transactions involves the disposition of 18 Tremont St., with Banker & Tradesman reporting last week on its Web site that the 202,000-square-foot office/retail building is being sold to a New York investment group, Meritage Properties. Founded by former Tishman Speyer Properties executive Andrew Nathan, Meritage will pay an estimated $38 million for 18 Tremont St., or about $188 per square foot. Unlike other suitors who had reportedly eyed the 12-story building for conversion to residential use or a hotel, Meritage will retain the asset as an office building, sources said.
In the other deals, New York-based Everest Partners last week put a hard deposit down on 31 Milk St. following months of negotiations, while a local suitor has agreed to acquire 45 Bromfield St., a 20,000-square-foot office building that Paradigm purchased in 1999. Spaulding & Slye Colliers is marketing 45 Bromfield St. and 18 Tremont St., while Trammell Crow Co. is the broker on the 31 Milk St. sale. The Bromfield asset is being purchased by investor William DuPont, owner of several Hub commercial buildings.
Nathan and DuPont were unavailable for comment last week, while Paradigm principal John Caldwell would not discuss the status of the 18 Tremont St. deal. Caldwell did, however, acknowledge the sales agreements with Everest and DuPont. While declining to provide specific details, Caldwell said his firm received encouraging interest for the three assets. “We had good activity on all of them,” he said.
‘Power’ Moves
Although the office market continues to struggle from the economic woes which have gripped Greater Boston for more than three years, investors have shown little evidence that they are curbing their enthusiasm for commercial properties, particularly in the downtown area. Spaulding & Slye earlier this year sold Two Liberty Square in Boston’s Financial District for more than $15 million, and broker Catherine F. Daume said last week she was impressed by the level of interest shown in the current crop of assets being harvested.
Daume said she is particularly enthused by the response to 18 Tremont St., especially given that Meritage is keeping the 103-year-old building’s use status quo. “Andy [Nathan] must know something,” said Daume, while also praising Paradigm and Westbrook for positioning the building for sale via an extensive renovation program undertaken during the past five years. Several million dollars were invested in the building’s facade, lobby and tenant areas, helping keep occupancy levels solid, particularly for a Class B building. After a recent surge of leasing at the property, 18 Tremont St. has occupancy of about 90 percent, Daume estimated.
Nathan founded Meritage in 2003 after 16 years at Tishman Speyer. Daume said she believes his knowledge of the market and his former firm’s focus on Class A properties will allow Nathan to improve 18 Tremont St’s position even more. Meritage has been active in the mid-Atlantic and New York regions since being launched, but the firm reportedly is targeting Boston for new opportunities. “It’s an honor to bring [Nathan] into the real estate community in Boston,” said Daume.
One thing Nathan may have recognized in opting to buy 18 Tremont St. is a solid rental market in the building’s neighborhood, which is situated in the Financial District on the edge of both Downtown Crossing and the Hub’s Government Center district. The area features several older Class B buildings that have somehow managed to perform well despite the recent market difficulties. Indeed, according to Spaulding & Slye Colliers, the overall Boston office market ended the first quarter with a vacancy rate of 11 percent, compared to just 6 percent for the area surrounding 18 Tremont St.
Daume cited a bevy of small professionals such as lawyers and accountants for bolstering the occupancy in the area. “It’s the power of that micro-market and the power of the small tenant,” she said. With more than 45 tenants in the property, 18 Tremont St. is typical of the Class B buildings in the area, according to Daume, who predicted Meritage will fare well with the asset going forward.
As for 31 Milk St., Everest officials and brokers at Trammell Crow were unavailable for comment, but sources said they expect the sale to be completed within the next 30 days. The purchase will be the first for Everest in downtown Boston, but the firm has been active in southern New England for several years, owning a variety of office, retail and industrial properties throughout the region. According to sources, Everest will self-manage 31 Milk St., but Paradigm reportedly will retain the management contract at 18 Tremont St.
When completed, the sale of 18 Tremont St. will be the latest in several commercial assets brokered by Spaulding & Slye Colliers, with the firm earlier this year selling two Cambridge buildings for $115 million. Daume also confirmed that she and colleagues Michael G. Smith and Scott J. Jamieson have been retained to sell 600 Memorial Drive in Cambridge, the headquarters of Modern Continental.
Joe Clements may be reached at jclements@thewarrengroup.com.
