One Beacon St., a 24-story downtown office tower, is under agreement in a sale that would rank among the top commercial real estate deals this year in Boston.
There is finally a light at the end of the tunnel in the sale of Boston’s One Beacon St.
Three years after joint venture owners Westbrook Partners and Prudential Real Estate began shopping the 34-story office tower, a group of New York investors that includes real estate entrepreneur Jeffrey Feil has committed to purchasing the 1.1 million-square-foot building, sources told Banker & Tradesman last week. The price is estimated to be in the $360 million range, which would equate to about $328 per square foot. The asset is being marketed by the investment sales group at Cushman & Wakefield of Massachusetts.
Robert E. Griffin Jr., president of Cushman & Wakefield of Massachusetts, declined to offer specifics such as the buyer’s identity or the price, but he did acknowledge that the 33-year-old tower is indeed under agreement. At the same time, Griffin stressed that the negotiations are far from complete, even with the buyers having reportedly taken the significant step of putting a deposit down on the building.
“We are working on a transaction, but reports that the deal is done are an exaggeration,” Griffin said. “We still have a few more hurdles to get over.”
In some respects, it is easy to understand such trepidation given the difficulties of selling One Beacon St. in the past, with several previous efforts having fallen apart for various reasons, including one instance where the buyer was unable to assemble the needed financing. Boston’s struggling office market has not helped the process, with vacancy rates rising sharply and rents tailing off since the recession hit the Bay State full force in 2002.
While Griffin remains cautious, other observers said they believe the latest discussions are likely to result in a sale. “I do think it’s going to happen,” opined one Hub investment broker familiar with the situation. The source called the pricing “reasonable” for all parties involved, and claimed that One Beacon St.’s ownership has taken aggressive steps to bolster its leasing roster in recent months, providing potential buyers the stability favored by real estate investors. Few properties of One Beacon St.’s heft and quality are available this year in Boston, noted the broker, who described the building as a Class A tower despite its age.
“This is a trophy asset,” said the source. “It’s going to trade at a premium, but I think it’s [$360 million] a reasonable price in today’s environment.”
Boston’s office market has also shown encouraging signs of a rebound in recent months, with Spaulding & Slye Colliers recording nearly 700,000 square feet of net absorption in the Financial District during the second quarter of 2004. The vacancy rate also seems to have leveled off, hitting 12.3 percent at the mid-year mark for the city’s office space inventory of 56 million square feet.
‘Great Address’
As for the suitor, Feil’s group would certainly seem to have the financial wherewithal to purchase One Beacon St. The Manhattan-based Feil Organization has acquired several expensive properties in recent years, including last month’s agreement to buy a New York City mixed-use complex that is trading for more than $350 million. Feil also has a minority position in the Sears Tower in Chicago, acquired earlier this year for $835 million by a team led by New York investor Joseph Chetrit.
“They get things done,” offered the broker about Feil, who was unavailable for comment by press deadline. Divergent outlooks between Westbrook and Prudential have also made it a challenge to complete previous sales of One Beacon St., according to the source, who said those differences of opinion seem to have been settled.
The negotiations involving One Beacon St. are occurring amid one of the real estate investment market’s most active cycles ever, with capital continuing to flow into the commercial sector regardless of the lingering economic difficulties of the past three years. Despite that, Boston’s office towers have been mostly left alone in 2004, partly because many of them have already changed hands in the recent past.
If the One Beacon St. sale does make it over the goal line, with sources predicting a closing by October, it would become one of the top deals of 2004. Although there have been several sales above $100 million and a number of others at that level are still in the works, One Beacon St. could even garner the second position in terms of total price. It is doubtful anyone will overcome the landmark sale of One Lincoln St., which was purchased for an astounding $705 million earlier this year by a Pennsylvania real estate investment trust.
Such stable assets as One Lincoln St., which is fully leased to State Street Corp., have attracted the greatest amount of attention among investors, with pricing being driven up dramatically. And while One Beacon St. may not have the modern amenities or financial appeal of One Lincoln St., observers said it remains among the city’s leading towers. “Everybody knows it,” said the broker, adding, “it’s really one of the great addresses in Boston.”
