The sale of Waltham’s Bay Colony Corporate Center to Beacon Capital Partners for $272 million earlier this year set a record price for a stand-alone suburban office property in Massachusetts, indicating underlying strength in the Watch City’s commercial real estate market and boding well for a possible sale of Polaroid’s 1265 Main St. headquarters.
Polaroid Corp.’s image in Massachusetts apparently is about to become even more faded, with sources claiming that the firm’s Waltham headquarters is being put on the market for sale. The Polaroid complex at 1265 Main St. contains about 1 million square feet of space on 100 acres overlooking Route 128, according to industry estimates.
Despite the large amount of existing space, some observers maintained that the asset is essentially a land opportunity for the winning bidder. Most of the buildings “are dogs,” opined one commercial real estate broker familiar with the complex. “It’s a tear-down,” said the source, who nonetheless predicted that the property will receive substantial attention from real estate investors. “It’s a great site,” said the source, given a location in the heart of the suburban west office market along with the apparent chance to develop some of the parcel into residential uses.
Calls to Polaroid Corp. officials were not returned by Banker & Tradesman’s press deadline. Unable to keep up with the revolution in digital photography, Polaroid has been on a rapid decline in the new millennium, filing for bankruptcy in October 2001 and laying off thousands of employees in recent years. The difficulties led to the sale of the company this spring to the Petters Group, a Minnesota-based conglomerate that focuses on consumer products. The firm paid $426 million, a figure that kept many Polaroid retirees from receiving promised pensions and medical benefits.
It is unclear how much of an employee presence remains at 1265 Main St. or whether any semblance of Polaroid would remain at the property via a sale/leaseback strategy or similar type of arrangement. According to at least one source, Petters Group officials have indicated the likelihood of keeping at least a portion of the Polaroid operation on the site. “I don’t think it would be forever, but it sounds like they want to stay there for awhile,” said the source.
Retaining occupancy at 1265 Main St. could impact the sales price of the complex, which is generating a wide berth of pricing estimates from industry observers. Two sources familiar with the property tagged its worth in the $50 million range, but others reportedly are touting a figure that could reach twice that amount. A residential play could improve the price, some noted, while the Waltham office market has rebounded well in recent months. That strength was evidenced by the sale earlier this year of Waltham’s Bay Colony Corporate Center to Beacon Capital Partners for $272 million, a record price for a stand-alone suburban office property in Massachusetts.
Located across Route 128 from Polaroid’s headquarters, Bay Colony is considered a far superior site as an office destination than 1265 Main St., but the hefty price paid for that property has piqued the interest of many investors looking for stable investment havens in the suburban market. The blockbuster Bay Colony transaction was negotiated by Cushman & Wakefield, which reportedly is also among several firms competing for the 1265 Main St. brokerage assignment.
Picturing the Site
Cushman & Wakefield officials declined to say whether they are pursuing the chance to market the complex, while officials at Trammell Crow Co. and CBRE/Whittier Partners also refused to say whether they are vying for the opportunity. Sources, however, claimed the investment sales groups at those firms had made presentations to Polaroid in recent weeks, as had Spaulding & Slye Colliers and Grubb & Ellis. As of press deadline, there was no indication whether the owners of the site had made a decision on the investment sales team.
One source familiar with 1265 Main St. said investors are likely to pitch the parcel as a mixed-use development, perhaps offering retail space as well as a residential component. Given the lack of approvals in place for such a vision, investors might be scared off by a high price tag, said the source, who noted the site also has accessibility issues and could be difficult to develop because of a hilly terrain on much of the parcel.
Some office development might be appropriate given the solid location, the source continued, but the idea of developing the entire parcel for that use could take more than a decade to complete and fill up with tenants. According to a report issued by Meredith & Grew Oncor, suburban Boston’s office market posted its sixth consecutive quarter of positive absorption in the first quarter of 2005 with a net total of 760,000 square feet. That put the overall suburban vacancy rate at 16.7 percent and the availability mark at 22.5 percent.
Besides lower vacancy rates, the Route 128/Massachusetts Turnpike submarket, which includes Waltham, also has seen rents begin to improve after several difficult years. Meredith & Grew places the average gross asking rent for the submarket at more than $22 per square foot, with the best space approaching $30 per square foot. By comparison, the lowest rates can be found along Interstate 495, where average asking rents run from $16 to $18 per square foot.
