399 Boylston St., a 13-story, 228,000-square-foot office building in Boston’s Back Bay, was purchased in 1999 by Centremark Properties for $52 million.
A Connecticut real estate investment firm has agreed to buy 399 Boylston St. in Boston’s Back Bay, according to industry sources. The 13-story, 228,000-square-foot structure was purchased in 1999 by Centremark Properties for $52 million. One source maintained that the deal will exceed the previous sales figure and could be close to $60 million, although neither side involved in the trade would acknowledge a price.
Trammell Crow Co. has been negotiating the sale on behalf of 399 Boylston St.’s owner since the start of the year. Investment sales chief James F. McCaffrey did not respond to inquiries by Banker & Trademan’s press deadline regarding the latest reports. Efforts to contact Centremark President Nader A. Golestaneh were unsuccessful, while a principal with the suitors, Abbey Road Advisors LLC, declined comment on the matter. “I can’t say anything at this point,” Abbey principal W. Mark Keeney told B&T in a brief phone call last week from his firm’s headquarters in Westport, Conn. Despite that, sources insisted that the two sides are deep into negotiating a deal. “They are way down the line,” one broker tracking the situation claimed, adding, “If it’s not done yet, it should be very soon.”
Situated prominently across from Copley Square in the middle of the Back Bay commercial district, 399 Boylston St. underwent an extensive renovation in 1983 and has seen additional investment under Centremark’s stewardship. According to one office leasing research guide, there is about 60,000 square feet of office space available in the building, which is also managed by Trammell Crow.
Efforts to sell 399 Boylston St. are occurring amid another hectic year for building sales in Massachusetts, with 2004’s record pace already being threatened by a tide of transactions both in Boston and throughout the nearby suburban markets. According to industry observers, capital continues to flow not only from domestic sources such as private opportunity groups and pension funds, but also from overseas investors eager to grab a stake in the U.S. real estate market. Along with mid-sized assets such as 399 Boylston St., the Hub has seen several large buildings and even a few property portfolios change hands in the opening third of 2005, with more deals expected to enter the pipeline in response to the hefty capital supply.
Back Bay Comeback
A lack of alternative investments is considered a major driver for capital chasing commercial properties, a trend which has continued despite three years of instability in the regional economy. Given that pricing for office buildings has risen steadily amid plummeting rental rates and increased vacancies, the prospect of better times ahead appears to be luring even more money into the investment property arena. The Back Bay itself has enjoyed a recent rebound in leasing fundamentals after being devastated by the recession, during which time the district’s vacancy rate soared to nearly 20 percent.
According to Spaulding & Slye Colliers, office leasing in the Back Bay reached 225,000 square feet of net absorption in the first quarter of 2005, bringing the vacancy rate down to 6.9 percent. Things appear to be shaping up for an even better outcome in the second quarter following several major lease agreements, including Investors Bank & Trust renewing at the John Hancock Tower and at Copley Place, leases totaling more than 500,000 square feet of space. Pearson Education and First Marblehead Corp. have also been growing within the Back Bay, which totals 12.9 million square feet of office space.
If Abbey Road Advisors does successfully acquire 399 Boylston St., it will be the company’s first purchase in the Hub. Previously, most of the company’s activities have been concentrated in its home state. According to the firm’s Web site, Abbey Road Advisors has six partners with a combined experience level of 150 years. Keeney, for example, spent 16 years in MetLife’s Real Estate Department, overseeing a 14 million-square-foot portfolio that included One Financial Center in Boston. Although it has no assets locally, the firm’s Web site lists Boston as one of three target markets along with New York City and Hartford, Conn. Other principals include James B. Digney, another MetLife veteran, as well as Philip R. DiGennaro, a former manager at Teachers Insurance and Annuity Association.
If the sale of 399 Boylston St. is completed, it will be just the latest property transaction brokered by Trammell Crow Co. this year after previous transactions in Westborough and Tewksbury, the latter involving the $24 million sale of the Highwood Office Park. Trammell Crow’s investment team of McCaffrey, Peter Joseph and Christopher Phaneuf has several other assets on the block for various clients, including the North Andover Mills in North Andover. Featuring 612,000 square feet of space, the complex is owned by Yale Properties. Although there is some vacancy in the property, North Andover Mills has a long-term lease to Schneider Automation for one of the buildings, providing a measure of stability to any potential investor. Sources could not say what level of interest there has been for the complex or whether there is an asking price. Yale also has hired Cushman & Wakefield to sell another high-profile suburban Boston asset, with CrossPoint in Lowell being marketed for about $115 million.
Joe Clements may be reached at jclements@thewarrengroup.com.
