The Blackstone Group and National Development have each scooped up properties in Cambridge and Woburn, respectively, for prices in the neighborhood of $80 million – causing industry insiders to speculate the properties’ worth.
The Blackstone Group has emerged as the winner of two foreclosed Cambridge properties at 125 and 150 CambridgePark Drive, which combine for roughly 437,000 square feet of space, according to multiple real estate executives familiar with the deal.
Blackstone is expected to pay roughly $80 million for the two assets. It previously acquired the properties in 1999 for $84 million, before selling to JP Morgan in 2001 for $98 million.
Barclays Capital took the properties back at a foreclosure auction last year after the buildings were lost by a subsidiary of the Archon Group. Blackstone’s anticipated purchase price is far less than the $127.9 million Archon paid for both properties in June 2007, according to data obtained from The Warren Group, publisher of Banker & Tradesman.
Sources also said the owner of Unicorn Office Park in Woburn – a New York-based equity fund whose assets are managed by JP Morgan – picked Newton-based National Development as its winning bidder. The firm is expected to pay between $78.5 million and $80 million for the six-building, 640,000-square-foot office complex.
"[National Development has] a much more forward-looking viewpoint and can see pending improvements in the market which will result in meaningful rent growth … and when we look back in 12 to 24 months, it will prove to be a very wise decision," the same source told Banker & Tradesman. "I think they saw the Bay Colony sale and what it achieved, and hoped to capture some of the momentum from that transaction."
Yet the prices for both are too high in the eyes of another real estate executive.
"I think [the price for Unicorn Office Park] is rich," said one commercial real estate executive. "I think they’re paying a very full price. And the Blackstone deal is a full price, though they did make a lot of money off it before. But I think that price is very high as well."
The final bidders for the Unicorn properties were National Development, Texas-based Transwestern, The Davis Cos., Leggatt McCall Properties and DivcoWest, which has offices in San Francisco and Boston, according to another executive familiar with the deal.
National Development will need to invest from $4 million to $8 million for common area improvements right away, according to the source. The property is about 78 percent leased now, and if some letters of intent go through, it would be brought to 83 percent leased, the source said. The property has been hard to keep occupied because of its location and competition from nearby landlords, like Cummings Properties, which builds its buildings for all cash so they don’t need to finance projects, the source added.
"[Cummings] runs a very cost-conscious operation … so they’re good at controlling costs," the source said. "It can be extremely hard to compete with them when the market is soft. And a lot of tenants would rather be in Burlington frankly, so it’s hard for that property to get premium rents because there is usually competition in better locations. Saying that, it’s not out in the hinterlands, but everybody thought [the final purchase price] was a high number. Some bidders were offering substantially less. But these are very talented, capable, smart guys, so my guess is over time they’ll make money out of this property. It generates lots of fee income, and leasing and management revenues."
Unicorn has also suffered from absentee institutional ownership, but the question now is if another institutional player will want to go after the office park once National Development re-positions it, which the source is confident they will do.
