New York-based Everest Partners has purchased the Norwood Business Center, a three-building, 155,000-square-foot complex at 1400 Providence Highway in Norwood.
Providing another shot of activity for the struggling Interstate 495 West market, a New York-based investment firm has acquired a four-building portfolio of so-called flex space located in Marlborough and Hopkinton. According to industry sources, Everest Partners paid the Archon Group $15 million for the package.
In another suburban transaction, Everest simultaneously purchased the Norwood Business Center in Norwood from the Bulfinch Cos. That three-building, 155,000-square-foot complex at 1400 Providence Highway features a mix of office and flex space.
“It has closed,” Archon Group Vice President Christopher Nelson told Banker & Tradesman on Friday regarding its deal with Everest. Citing confidentiality agreements, Nelson declined to discuss other issues related to the sale, but sources maintained that the assets at 25 and 45 South St. in Hopkinton and 257 and 259 Cedar Hill St. in Marlborough traded for just under $65 per square foot. The portfolio totals 350,000 square feet.
Everest Partners principal Kambiz Shahbazi did not return a phone call to his New York City headquarters by press deadline. The investment group has been active in New England for several years, owning and managing retail, office and industrial buildings in New Hampshire, Rhode Island and Massachusetts. Locally, the firm owns the Jefferson Office Park in North Andover and an office park fronting Route 128 in Peabody.
‘A Fair Deal’
The sale of the Archon portfolio was handled by Gary J. Lemire and Biria St. John of CB Richard Ellis/Whittier Partners. While he also declined to discuss specifics, Lemire said there was an encouraging level of interest in the portfolio. “I think it was a fair deal for everybody,” Lemire said of the final outcome.
Some sources had expressed surprise about the length of the negotiations, with Everest Partners reportedly having had the buildings under agreement for several months. There had been speculation that deteriorating market conditions had chilled the effort, but other sources insisted the delay was tied to obtaining the proper financing. One source maintained that the portfolio traded at a capitalization rate above 10 percent, but neither Lemire nor Nelson would comment on that issue.
As with the suburban office market, flex space has also seen an increase in vacancy and availability rates in recent months, although rents have not dropped as substantially as in the office sector. Flex, or R&D space, is a mix of manufacturing, warehouse and office uses, with the typical construction a single- or two-story building featuring between 30 percent and 40 percent of office build-out. Unlike warehouse buildings, flex ceilings are usually in the 15- to 20-foot range, compared to 30 feet for modern distribution properties.
According to Richards Barry Joyce & Partners, the Interstate 495 West market features 4.4 million square feet of flex space, with a 28.3 percent vacancy rate and an alarming 38.3 percent availability rate at the end of the first quarter. The overall suburban vacancy rate for flex space is 19.3 percent, while the overall availability mark is 30.4 percent.
As for the Archon Group portfolio, sources said there are pockets of vacancy in the properties, with one claiming that the future of a leading South Street tenant, EMC Corp., is uncertain. One source claimed EMC is looking to sublet some of its estimated 55,000 square feet. Nelson, however, described the portfolio as “stabilized,” and said he was pleased with the investor response to the properties.
“It was the appropriate time to sell,” Nelson said, with Archon having held the properties since the late 1990s. In another recent MetroWest disposition, Archon sold the Westborough Office Park in Westborough. The Windsor Fund paid just under $50 million for the existing four buildings, while Carruth Capital of Westborough paid an estimated $7.5 million for development rights on another 750,000 square feet at that park. Both of those sales were brokered by Trammell Crow Co. of Boston.
The Norwood sale, meanwhile, is being treated as a separate deal, although one source said Everest secured both assets in the same financing package. The exact price of the deal with Bulfinch was unclear, with Bulfinch officials not responding to inquiries by press deadline. The firm paid just under $11 million for the property in May 2000, and undertook an extensive renovation program.
Partly due to the busy market of the late 1990s and early 2000, 1400 Providence Highway has seen a number of ownership changes in recent years, with Bulfinch having purchased the complex from a partnership of AEW Capital Management and Cathartes Investments. That partnership had purchased the property from John Hancock Mutual Life Insurance Co. in 1998 for $8.9 million.
Using financing from Anglo-Irish Bank, Bulfinch undertook an aggressive upgrade of 1400 Providence Highway, installing new mechanical systems, making landscape improvements and repositioning the asset as the Norwood Business Center. The firm has been actively pursuing other repositioning efforts throughout Greater Boston, with current projects in Lexington and Cambridge.
Joe Clements may be reached at jclements@thewarrengroup.com.
