Lucent’s 500,000-square-foot office complex at 55 Fairbanks Blvd. in Marlborough is reportedly about to trade hands for about $27 million despite its current lack of tenants.
In a deal that should provide a badly needed boost for Greater Boston’s crumbling commercial real estate sector, a local investment group has tied up Lucent’s 500,000-square-foot office complex in Marlborough, industry sources said last week. The sale to Ian Gillespie and Hall Properties is reportedly in the $27 million range.
“They are hard on [the financing] and they are going to close on it,” insisted one source, who predicted the final signing could come as early as next week. Citing confidentiality agreements, Gillespie declined to comment on the matter.
Observers said the sale of 55 Fairbanks Blvd. is significant for several reasons, including the buyers’ ability to secure financing for an Interstate 495 office campus that is essentially empty, particularly given the recent onslaught of excess space cascading onto that region. Mid-year figures compiled by Richards Barry Joyce & Partners Research Director Katie Kelly give I-495 West a 24.6 percent availability rate, for example, while I-495 North has suddenly ballooned to 30.1 percent.
Another issue under debate is the pricing of the transaction. One investor familiar with the property called the $55 per-square-foot rate “a bit high,” but others maintained it could become one of the steals of the 2002 investment cycle, provided the Metrowest sector ultimately rebounds as many expect. Besides another 500,000 square feet of development potential on the 106-acre parcel, sources said the existing Lucent buildings are in solid shape and are being purchased for a fraction of their replacement cost. The site was initially developed in the 1980s by Cabot Cabot & Forbes.
“I wouldn’t bet against them [succeeding],” said one source, especially given that Gillespie and Hall produced one of the better commercial real estate turnarounds of the mid-1990s, acquiring 300 Baker Ave. in Concord for $6.2 million in 1996 and selling the 400,000-square-foot rehab three years later for $47 million.
“They hit a grand slam with Baker Ave.,” acknowledged Trammell Crow Co. principal James McCaffrey, praising the team’s proven ability to turn around white elephants. McCaffrey is among those bullish on Marlborough as a business destination, citing the increasing diversity of the tenant base and the region’s access to an educated labor force as key reasons for that outlook.
Investor confidence also appears abundant, as witnessed by the just-completed sale of two buildings at Lake Williams Corporate Center in Marlborough. In a deal brokered by Trammell Crow’s investment group, Great Point Investors of Boston paid $33.2 million to a partnership of National Development of New England and Taurus Investments. The existing buildings total 215,000 square feet, while there is an additional 100,000 square feet of approved future development.
McCaffrey noted the Lake Williams sale is different in that the properties are both brand new construction and are secured by long-term leases to well-heeled firms such as Fidelity Investments. “People want income producers with strong terms and credit,” he explained. “That’s what we found at Lake Williams.”
Weighing In
The premium on such stability was evident at two recent sales in Boxboro, with Wells Real Estate Funds paying an estimated $201 per square foot for 90 Central St. and Lend Lease Real Estate Investments purchasing the adjacent 80 Central St. for about $90 per square foot. At a recent mid-year overview, Spaulding & Slye broker Michael G. Smith used the two transactions to demonstrate the difference a strong-credit-tenant deal can make, noting that Agilent Technologies has a long-term lease at 90 Central St., whereas Lend Lease is facing a tenant rollover beginning in two years.
In either case, Insignia/ESG Senior Managing Director Lisa Campoli said the sales reflect well on Greater Boston, with investors chasing properties even in the face of the region’s recent economic struggles. While it may be difficult to ignore the economic malaise hanging over the region at present, Campoli said there is a sense that commercial real estate is still a safe haven for one’s capital, particularly given the continued volatility seen in the stock market. According to Campoli, institutional investors such as pension funds are currently increasing their allocations for commercial real estate in the United States. That bodes well locally, she said.
“People aren’t necessarily enthusiastic about the current conditions, but I think they feel comfortable that things will improve long-term,” she said of the Greater Boston market, adding that potential buyers “are more willing to stake a bet on the suburbs now.” Campoli joined colleagues Brian Barringer and Kerrin Carter in brokering both Boxboro deals on behalf of the seller, Bren Schreiber Properties. The 90 Central St. building traded for $35.1 million, while 80 Central St. fetched $13.8 million.
According to investment specialists, the biggest challenge to date has not been finding capital sources, but rather convincing owners to sell in a declining cycle. After months of stubbornness, however, owners apparently are beginning to test the waters, said Campoli, adding that her investment group has met recently with several landlords who are now thinking of placing their assets out to bid.
“Everybody is starting to weigh selling in a market where there is strong investment interest,” concurred McCaffrey. “I do think there is going to be a lot more activity” in the final six months of 2002.
Meanwhile, observers are questioning the impact the sale of 55 Fairbanks Blvd. will have on a similar Marlborough opportunity, that being the 3Com campus just up the street. While newer and perhaps more centrally located, the 540,000-square-foot 3Com property is regarded as difficult to retrofit for multiple tenants and has been met with general indifference from investment circles to date. Others maintain the estimated asking price of $130 per square foot reportedly demanded by 3Com has made it difficult to trade, although brokers at Cushman & Wakefield are said to be renewing their marketing campaign. Cushman & Wakefield did not return calls by press deadline.
“If those guys get realistic on their
