The Mullins Cos. has decided to take Kimball Court, a sprawling apartment complex on the Woburn/Burlington line, off the sales block.
The desire for multifamily real estate continues to be white-hot, but at least one such investment opportunity in Greater Boston has gone by the wayside, with the owners of Kimball Court on the Woburn/Burlington line opting to retain control of the sprawling apartment complex after putting it up for sale last autumn.
“The owners just had a change of heart and decided against selling it,” Cushman & Wakefield of Massachusetts President Robert E. Griffin Jr. explained last week in acknowledging the decision to retrench by the Mullins Cos. Griffin said the sales effort, which began in November, received “great pricing” from potential buyers, but the interest was apparently not enough for Mullins to part company with the 781-unit portfolio.
Located along Route 128, the real estate that was temporarily available for sale actually consists of two separate properties, one the existing three-building Kimball Court apartments and the other Kimball Woods, a 256-unit luxury development that is currently under construction. Efforts to contact the Mullins Cos. were unsuccessful by Banker & Tradesman’s press deadline. Although Cushman & Wakefield never provided an asking price, industry sources had predicted Kimball Court would have traded in the $170 million range.
While it would have represented another major commercial real estate transaction for Cushman & Wakefield’s Capital Markets Group, Kimball Court has already been supplanted by another large apartment assignment. During his group’s annual “Top O’ the Market” investment overview last Friday at Boston’s Faneuil Hall, Griffin announced Cushman & Wakefield’s designation by Capital Properties to broker a large suburban apartment portfolio that had been available three years ago until owner Richard Cohen turned back late in the process and retaining most of the assets. Griffin’s group was the agent in the previous attempt to sell the Edgewater Place portfolio, which he estimated could fetch $235 million, or nearly $150,000 per unit, in the current environment.
“We think that’s going to be very well received,” said Griffin of the estimated 1,600 units, anchored by the Edgewater Hills apartments in Framingham. Now in its seventh year, the overview featuring Cushman & Wakefield’s investment sales team attracted a packed audience gathered to gain insight into the prospects for 2006. In indicating that the condominium market has peaked, Griffin said he believes multifamily will stay in favor, especially among investors seeking value-added opportunities. Retail remains “hot as a pistol,” he said, relaying several such deals being handled by specialists Geoffrey Millerd and Ryan Cox, including a Wellesley retail building targeted for $500 per square foot, or about $21 million.
Cautioning that assets need to be priced realistically, citing a surge of re-trading efforts during negotiations, Griffin said he anticipates another fast-paced year for commercial real estate sales, with virtually every product type expected to garner attention. Backed by a lengthy track record of superior financial returns, real estate is a darling for many investors today, said Griffin, advising that pension funds have reversed a past pattern of being outmaneuvered by other bidders. “Pension funds are really driving the pricing,” he said, making it tough to compete when such sources pursue a property. The late-2005 purchase of a Waltham office park by Boston Properties shows real estate investment trusts are also active in Massachusetts, said Griffin, while new entities which have been successful buying in the area include Spear Street Capital, led by former Shorenstein Co. principal John Grassi, New York-based Broadway Partners and opportunity fund Brickman Assoc.
Reports that foreign investors have forsaken the Bay State are “greatly exaggerated,” insisted Griffin, listing Middle Eastern and Irish capital as being particularly prevalent. Aided by Anglo-Irish Bank Corp., for example, an Irish investor just outlasted a bevy of competitors for 10 and 24 School St. in Boston’s Downtown Crossing, he noted.
Among the largest blockbuster agreements is the pending deal for Boston’s One Federal St., a 38-story office tower under contract to Tishman Speyer Properties. One Federal St. is among the assets being brokered for sale by Cushman’s Capital Markets Group, with the firm representing the current ownership of Jamestown. The strong investor interest in that property, which included a showdown among three finalists earlier this month, is considered a reflection of Boston’s recent office market resurgence. One Federal St. is expected to sell this spring for more than $515 million.
‘Rising Tide’
Boston has been among the nation’s top markets for office building sales in recent years, said Griffin, and the “rising tide” of rents that is pushing $60 per square foot for premier addresses such as International Place is only going to increase the attraction, Griffin predicted. Cushman & Wakefield is projecting first-quarter net absorption of 175,000 square feet in the Hub alone.
During last Friday’s overview, Griffin also acknowledged that the Capital Markets Group has been hired by the Feil Organization of New York to market One Beacon St., a 34-story Boston office tower that the company has only owned since 2004. While Griffin would not provide an asking price, he did opine that the Feil Organization should fetch more than the $340 million it paid for the 1.1 million-square-foot tower.
“I can guarantee you that,” Griffin said of the chances for the Feil Organization to reap a figure above that level. Cushman & Wakefield is also optimistic about the prospects for another major asset it is peddling, the Technology Square office/laboratory complex in Cambridge owned by the Massachusetts Institute of Technology.
Totaling 1.1 million square feet in eight buildings, Technology Square was acquired by MIT five years ago for $280 million. The property is also expected to fetch more than $500 million. Although Griffin did not provide any sales estimate, he did praise Technology Square as being “among the best” investment opportunities available in New England this year.
As with downtown Boston, Cambridge appears to be mending its previous problems, said Griffin, reporting rents of $37 per square foot for the best office space and a 22 percent hike in laboratory shell rents in the last quarter. Sporting more than one-third of all the region’s laboratory space, there is little available for leasing in Cambridge, said Griffin, making it likely for further rent appreciation. The pending purchase of One Kendall Square by the Beal Cos. for $210 million is one sign of Cambridge’s value, said Griffin, as well as the $72 million disposition of 300 Third St. earlier this month by Beal to Alexandria Real Estate.
With Cambridge as the backbone, other so-called inner suburban office markets have also been on the mend, said Griffin, noting a 16 percent drop in vacancy rates for such communities as Allston, Brighton and Somerville. Those gains should grab the attention of investors, said Griffin, who predicted that even the troubled Boston Tech Center in Allston will soon find a taker. Cushman & Wakefield is offering the hulking vacant structure overlooking the Massachusetts Turnpike Extension for $21 million. Several uses have been entertained for the building, said Griffin, including student housing.
Having brokered more than $2 billion of real estate annually for the past three years, Cushman’s Capital Markets Group appears well on its way to reaching that level again in 2006, with the firm unveiling several other properties it will be marketing. BPG Ltd., for example, has retained the company to sell a 126-acre office park in Marlborough, a deal expected to sell for around $130 million, more than double the $55 million paid by BPG just four years ago.
The Interstate 495 West office area that includes Marlborough was among the hardest-hit by the latest downturn, but Griffin predicted another rebound similar to several recoveries posted there in the past 20 years. “It is a very resilient market,” said Griffin, noting that life sciences and medical devices companies are finding the MetroWest a reasonable alternative to higher-priced markets.
