The Borders Book & Music Store building, located at 10 and 24 School St. in Boston’s Downtown Crossing shopping district, is reportedly under a purchase-and-sale contract to an Ireland-based real estate investment group.
It looks like there could soon be a happy ending on the disposition of the Borders Book & Music Store building in Boston’s Downtown Crossing – particularly for the sellers.
Put on the market last November by Lincoln Property Co., the conjoined retail/office buildings known as 10 and 24 School St. are reportedly under a purchase-and-sale contract to an Ireland-based real estate investment group for a figure said to exceed $30 million, with one source pegging the agreement at $32 million. If accurate, that would be substantially above the $25 million range industry observers had predicted the asset would fetch when it was first offered to the market last autumn.
“That’s an outstanding price,” one broker familiar with the sale said last week, also maintaining that the capitalization rate will be in the 5 percent to 6 percent range, further reflecting the asset’s strength. The source, who requested anonymity, said a combination of factors may have led to such an impressive response by capital sources, including a deal size that ostensibly appeals to many buyers, plus the building’s location in the core of the Hub’s Downtown Crossing shopping district. A solid anchor tenant in Borders and overall ardor for retail real estate also likely played a role in generating the high level of bidders, said the source.
According to sources, the winning Irish suitor – Clarendon Properties – is being represented by Anglo-Irish Bank, which has its U.S. offices located just a few blocks away on State Street. Anglo-Irish Bank made a major splash in Boston last year when it acquired the retail portion of 200 State St. at Faneuil Hall from Beacon Capital Partners, then sold it to Clarendon. The firm it is assisting on the latest deal reportedly has an extensive track record in retail assets, and one source claimed Clarendon Properties already has commercial real estate holdings in the United States. Anglo-Irish Bank also just purchased a prime retail property in Chicago.
As of late last week, none of the parties involved would discuss the School Street situation in detail. Lincoln Property Co. principal John Miller declined comment, as did local Anglo-Irish Bank Vice President Niall Gunne, who works in the firm’s acquisitions department. The transaction is being negotiated by the Capital Markets Group at Cushman & Wakefield of Massachusetts, at which principal Edward C. Maher Jr. would only confirm that the property is under agreement to an unnamed foreign buyer.
‘An Unbelievable Business’
Maher did acknowledge that 10 and 24 School St. received substantial interest from the real estate capital universe, with his group fielding 23 serious offers before whittling that number to 10 and then paring it down to Clarendon Properties. “We were surprised ourselves at the number of people who went after it,” said Maher, adding that the bidders were a mixed bag of overseas capital, public institutions and several private players. One source claimed there were multiple offers exceeding $30 million, but Maher would not discuss specifics of the process.
In assessing the reasons behind the solid response for 10 and 24 School St., Maher concurred that Borders offered a measure of comfort to many of the prospects, particularly with several years remaining on its lease and a 10-year option when the original pact expires. Borders occupies approximately 40,000 square feet, while the remainder is occupied by office users. The rebound of Boston’s office market during the past year likely increased interest in 10 and 24 School St., added Maher, whose firm is actively offering several Boston office buildings to investors as well. Between the office and retail space, 10 and 24 School St. is approximately 95 percent occupied, Maher said.
The Downtown Crossing shopping district relies heavily on the city’s office market, fueling some 100,000 visitors during the weekdays and proving especially robust in solid economic times. The area has seen some difficulties in the past few years, as evidenced by several empty storefronts which have had difficulty finding new tenants. Larger forces are also at play – the advent of the Internet is partly seen as responsible for the pending departure of a large Barnes & Noble bookstore from Downtown Crossing just a few blocks from the Borders property, for example, a defection expected to leave upward of 50,000 square feet available.
No such woes have apparently dogged Borders Book & Music, with one source claiming last week that it is among the national chain’s best-performing locations. “They do an unbelievable business there,” said one Hub broker, even though the multi-level layout of the property has not been as successful for other retailers in the district. The advent of several colleges into the area has been one reason for the success, claimed the broker, adding that the store “fits well” with the shopping habits of local workers.
In any event, sources claimed that 10 and 24 School St. is under contract to Clarendon Properties as of last week. Lincoln Property Co. has owned the building since buying it for $13.5 million in 1996.
