Despite substantial interest from buyers, Edwards Day Investment has taken Boston’s Two Liberty Square off the market.
Proving that one truly cannot always get what they want, a prime office building in Boston’s Financial District has been taken off the market despite substantial interest from potential buyers. The disposition of Two Liberty Square was reportedly blocked by a snag with the ownership’s loan, forcing Edwards Day Investments to pull the asset in the midst of one of the strongest commercial real estate sales seasons ever witnessed in the Hub.
“We are not trying to sell it,” confirmed principal Robert M. Day, whose Atlanta-based operation had retained Spaulding & Slye Colliers late last year to trade the 8-story building. Day would not provide additional details on why the effort was shelved, while Spaulding & Slye investment broker Michael G. Smith would only say that the property – home to Putnam Investments – was well received by the investment community when it was available.
The 91-year-old building, which was renovated in 1997, “got tremendous interest,” noted Smith, adding, “it’s a wonderful asset.” The presence of fund giant Putnam as chief tenant was considered a key plus among buyers seeking stable elements to their real estate conquests, according to sources. The firm’s high-profile financial market scandals were not considered a detriment to the real estate’s value, those spoken to agreed. The remaining term Putnam has on its two leases in the building is said to be limited, but observers said Two Liberty Square was seen as a deal with a solid foundation credit-wise, not to mention possessing a ground zero location in the city’s central business district.
“The building is fine – it would absolutely sell,” opined one source, among several who claimed the inability to move Two Liberty Square involved the loan Edwards Day used to acquire the property in 2000. The firm paid $12 million for the 68,000-square-foot building barely a year after a German investor purchased it for $10.8 million. Edwards Day also was backed by German capital via the loan, but the financing reportedly included a stiff penalty for repaying the note early, with the terms apparently onerous enough to skew the recent sales process.
Day declined to offer any insight regarding the loan, which sources said his firm had doggedly tried to adjust. Despite the apparent inability to reach a successful conclusion with the lender, Day did not entirely dismiss the notion that conditions could change over the near term enough to allow Two Liberty Square to return to the sales shelf. Indeed, one source familiar with the imbroglio maintained that there is a modicum of hope that an arrangement can be reached with the lender to allow a sale to move forward before the favorable sales climate ebbs. As of now, however, Smith concurred that “we are not actively marketing” Two Liberty Square.
‘Busy’ Summer
Even with that property off the firm’s plate, Spaulding & Slye’s Investment Sales Group has little opportunity for a summer respite. “We’re continuing to be busy,” agreed Smith, whose firm has already traded several properties in the area and is in active negotiations on a number of other transactions, including 330 Stuart St. and 745 Boylston St., both in Boston’s Back Bay. Spaulding & Slye just this past week was sifting through offers on 330 Stuart St., known locally as the home of renowned restaurant Grill 23.
Although it could remain primarily as an office building, 330 Stuart St. is considered a potential candidate as a residential conversion, Smith concurred, although he would not identify which suitors have put bids in on the building. A nearby property at 441 Stuart St. has just been acquired by a local development group which plans to convert the upper floors of that 11-story building to luxury condominiums, while a number of other Boston office buildings are being repositioned for residential as well, including a portion of 70-80 Lincoln St. in the South Station market.
Smith would not discuss the status of 745 Boylston St., although some sources claimed an agreement is pending on that 8-story, 111,000-square-foot building. The mix of retail and office space in the bustling Back Bay has made 745 Boylston St. well regarded, said Smith, whose firm is representing the seller, Prudential Real Estate Investors. The building had been acquired by TMW Real Estate Group in 1999 for $29.9 million, with that investment advisory firm later being purchased by Prudential.
Besides the opportunity to buy a piece of downtown Boston, a confluence of events has made 2004 one of the most active years ever seen for commercial real estate deals in the city, with unusually low interest rates and a perceived lack of alternative sources for capital placement leading to a surge of money available. A slew of property owners have brought their assets to the market to take advantage of the phenomenon, which many believe will begin to subside later in the year as interest rates move upward. Along with the current crop of properties in the pipeline, indications are that other assets will be offered up in the coming months to beat the anticipated slowdown.
