Six months ago, the smart money in the local real estate industry had the former Polaroid campus sitting idle for years. Investors were fleeing to the safety of strong, cash-flowing core assets, and the 119-acre Waltham parcel was about as far from a core asset as you could find. 

Half-demolished buildings littered a site with costly infrastructure challenges. The property had been seized at foreclosure auction, after its marquee owner had walked away from $120 million in mortgage debt. Selling the property assumed there was an appetite for raw development sites, at a time when a lack of capital and a catastrophic fall in rents had all but iced new developments.

But two weeks ago, Boston developers Sam Park & Co. put up $40 million in cash for the Polaroid site. Company president Sam Park immediately started talking about jumpstarting the first phase of new construction at the property, with or without tenants in place.

The Polaroid purchase was the most bullish move a local developer has made in quite some time, but Park isn’t alone. A string of deals from Brockton to Burlington show renewed confidence in risk-taking – at the right properties and the right price.

On The Upswing

The Davis Cos. recently purchased two commercial properties at foreclosure auction, with an eye firmly on an economic recovery. New England Development just re-acquired the Westgate Mall in Brockton, and is talking about breaking ground on a long-delayed Chestnut Hill development. Boston’s Synergy Investment & Development scooped up a vacant downtown office property. And biotech landlord Alexandria Real Estate Equities is preparing for new construction on both sides of the Charles River.

“For the past two years, there’s been a psychology of mourning,” Park said. “We’re at the reset level now, and activity will pick up. We are on the upswing. There’s less fear about the economy crashing and burning again. You will see people start developing again. I don’t hear as much doom and gloom anymore as I hear about people hunting opportunity. It’s a bullish sign, and it’s affecting investors.”

“I’m seeing selective optimism,” added David Begelfer, CEO of commercial property trade group NAIOP Massachusetts. “Overall, we’re still in a bit of a depressed market, but there are signs of life.”

“Last spring, we were giving out pills for depression,” said Michael Fascitelli, CEO of Vornado Realty Trust, speaking at a recent Urban Land Institute roundtable. He saw lenders’ willingness to put money into real estate as a marked change that was driving a steady uptick in sales activity.

“[Since then] we’ve had an awful lot of change,” Fascitelli added. “The capital markets are significantly better. The fundamentals are moderately better, but the capital markets are always ahead of the fundamentals.”

Federal policy on loan workouts has kept an anticipated flood of distressed commercial properties from coming to market, and until relatively recently, uncertainty over the economy was keeping both lenders and buyers away from all but the safest-looking deals.

“Now, the broad perception is we’re in a period of recovery,” said Jonathan Davis, CEO of the Davis Cos. “It might be slow, but it’s coming.”

Davis recently purchased two office buildings at the Burlington Woods office park for $33 million at foreclosure auction. His firm also paid $13.5 million for 41 unsold condominium units at the Audubon Park development in Boston.

Pre-Feeding Frenzy

Nine months ago, buyers were leery of buying into properties with big chunks of vacancy while they were still searching for the market’s bottom. Now, Davis said, “More investors are perceiving opportunity, and they’re underwriting more confidently. The tenant base has gone from contraction to stability, with pockets of growth. Lenders are starting to loosen up a bit. We’re starting to see more movement.”

In recent months, CB Richard Ellis executive vice president Chris Angelone has brokered the sale of 101 Summer St., a vacant office building in downtown Boston, and the Westgate Mall, a Brockton retail complex seized by its lender at foreclosure auction.

“I do think the market is still challenged for more commodity-type real estate, or where there’s no clear path to an upside, or where it doesn’t feel like there’s downside protection,” said Angelone. But, he added, “The market is very strong for core assets, for quality property or property where there’s a compelling story.”

At Westgate and 101 Summer, Angelone said, buyers took on short-term vacancy issues, and in return, they got good long-term buys at attractive pricing.

“[It’s] a great sign people have the ability to look into the future and see opportunity,” Angelone said of the Polaroid deal. “No one would’ve considered vacant buildings or land a year ago. The fact that people are now willing to do that is a good sign.”

“We realize the market is cyclical, but the risk of it dropping much further is very unlikely,” Park said. “Activity is picking up because values are down to the point where a lot of people feel we’ve hit bottom. I don’t think land values will drop significantly lower than today. Now is the time to buy, before the feeding frenzy starts.”