Enticed by Boston’s booming office market, commercial real estate sales activity continues to surge in the Hub, with two Financial District properties and a 14-year-old Back Bay building among the latest assets trading hands.
Along with closings on 160 Federal St. to Taurus Investments and 10/Ten Post Office Square to Walton Street Capital, Lend Lease Real Estate Investments has tied up 855 Boylston St. in the Back Bay for a reported $47 million, according to industry sources. At that price, Lend Lease would pay an estimated $323 per square foot for the 145,000-square-foot structure.
“That’s a very strong number,” said one source familiar with the deal. While it may not be a record for a Back Bay office property, the source maintained it would be close to the high-water mark, especially for a deal that large. In March 1999, 711 Boylston St. fetched $332 per square foot, but the source noted that building is only 33,000 square feet, a large portion of which is retail space. The sale of 500 Boylston St. to Cornerstone Properties in October 1997 also eclipsed the $300-per-square foot level when it traded at the $303 level.
Bradley Olson, a real estate investment advisor who works primarily with overseas clients, said he was not surprised to hear 855 Boylston St. trading at such a high number. Olson, who has helped clients purchase several Back Bay buildings in recent years, noted that rental rates in the district have risen sharply in recent months.
“Generally speaking, I would say that $300 per square foot is a number that investors could feel quite comfortable with, given the way rents have gone in the Back Bay recently,” said Olson.
‘Passive Player’
Calls to 855 Boylston St.’s majority owners, the Bristol Group of California, were not returned by Banker & Tradesman’s press deadline, while Lend Lease officials also did not respond to inquiries. Declining comment was J. Brad Griffith of Leggat McCall Properties, the original developer of 855 Boylston St. and today a minority partner in the 11-story building, which was designed by architect Howard Elkus.
“We just do not comment on things until they are public,” said Griffith, who stressed that Leggat is a “passive player” in the deal. He was more able to talk about 10/Ten Post Office Square, a pair of conjoined office buildings located in the heart of the Financial District. In a deal brokered by Trammell Crow, the 410,000-square-foot complex was purchased by Chicago-based Walton Street Capital for $107 million.
“We’re very pleased with it,” said Griffith, whose firm owned the property for 21 years and last year brought it through an extensive renovation. “Everybody seems to be happy.”
Trammell Crow principal Edward C. Maher Jr. of the company’s Investment Services Group concurred with that assessment, maintaining that it was a rare occurrence where both buyer and seller felt mutually positive about the deal. “It worked out well for everyone,” said Maher, explaining that LMP got a solid price for the buildings while Walton Street should realize strong returns with several below-market leases preparing to roll over in the coming years. Built in 1929, 10/Ten Post Office Square sold for just over $260 per square foot. It is the second Financial District sale completed by LMP in the past few weeks, with Trammell Crow also brokering the sale of nearby 40 Broad St. to TMW, a German group, for $63 million.
Bull Market
In the 160 Federal St. sale, Taurus finally wrapped up one of the longer-running acquisitions in the city in some time, with the firm having begun working on the deal last March. It closed last week, Taurus principal Peter Merrigan acknowledged, with the private investment firm paying $81 million, or $234 per square foot for the 345,000-square-foot building.
Complicating the sale of 160 Federal St. was a condominium structure that had four different owners. As part of the arrangement, Taurus structured sale/leaseback agreements with two of the owners, Meredith & Grew and Pricewaterhousecoopers, the latter of which took 155,000 square feet in a three-year deal as the accounting giant ponders its future office needs. There was also a need for extensive due diligence of the building, which Merrigan said Taurus ultimately found to be “in excellent condition.”
“We view this as being very complimentary to our other [holdings] downtown,” said Merrigan, whose firm has seven other properties in the Hub now, including 22 Batterymarch St., 109-115 Broad St., 148 State St. and 184 High St. The company also has 87 Summer St., a 25,000-square-foot building, under agreement as well.
While acknowledging that the process was a long one, Merrigan said he believes it is the sort of deal that Taurus has come to be known for, buying assets with many unique facets that might scare other buyers away. The company typically takes a value-added approach to its investments, one which Merrigan said has given Taurus “a reputation of being able to do the more complicated transactions.”
“We’re pretty proud of having been able to pull it off,” said Merrigan.
Another Boston-based investor who looked at 160 Federal St. agreed that the deal was challenging, acknowledging that the multiple ownership and other issues probably kept some suitors away. But despite lower-than-normal ceiling heights and a few other quirks, the investor added that Taurus “should do well” with the 24-story tower, which was originally constructed in 1930.
“I think they’ve got themselves a pretty solid building,” the investor said.
