New Boston Fund has sold 300 Billerica Road in Chelmsford to Boston Properties for $10 million, one of three major suburban office deals recently negotiated by Trammell Crow Co.
Ending 2005 in a flourish, Trammell Crow Co. negotiated a trio of suburban office building sales that attracted an array of money sources, including a private opportunity fund, real estate investment trust and a recently formed local company fueled by tax-shelter capital.
In the largest transaction, New Boston Fund paid $34 million for the New England Business Center in Andover, a four-building, 245,000-square-foot office park sited on a 42-acre parcel overlooking Interstate 93. In separate deals, NBF traded 300 Billerica Road in Chelmsford to Boston Properties for $10 million, while Direct Invest Inc. bought 829 Middlesex Turnpike in Billerica from the Nordblom Co. for $17.2 million.
“We were overwhelmed with interest,” Trammell Crow Co. principal James McCaffrey said last week of the latter deal, in which Nordblom reaped the rewards of a l2-year lease to American Science & Engineering, a defense-related firm which occupies nearly all of the 186,000 square feet. “There are three boxes investors check off these days – term, [tenant] credit and product quality, and this hit all three,” said McCaffrey, who was joined by other members of the firm’s investment sales team in brokering the deal, including principal Peter Joseph, Christopher Phaneuf and Jordan Berns.
A Hub-based real estate opportunity fund run by the well-known Rappaport family, NBF did a two-step to end the year, trading the Chelmsford asset to another homegrown operation while securing ownership of the New England Business Center. According to Joseph, the presence of Kronos Inc. on a long-term basis generated solid competition for 300 Billerica Road, giving winning bidder Boston Properties the comfort to acquire the asset for $111 per square foot, an impressive figure for a building now more than 20 years old.
Originally constructed by New England Development, the New England Business Center is a prime multi-tenanted office park that also sports a solid tenant roster and amenities such as a 5,000-square-foot daycare center on the premises operated by Bright Horizons, said Joseph. Mostly constructed in the 1980s, the park’s latest addition is 35 New England Business Center, a research-and-development building completed in the mid-1990s. The deal also includes rights to expand 20 New England Business Center by another 53,000 square feet and a land parcel that can yield 125,000 square feet of new space.
At 85 percent occupancy when bought by NBF, New England Business Center offers steady income into the near future, said Joseph, but also offers opportunities from new development and lease rollover timed to occur in what most observers anticipate will be an improving economic climate. A dozen offers were tendered on the park, said Joseph, adding that the activity there and on the other two sales indicate investors are bullish on suburban Boston, even in fringe areas that still have extensive vacancies and weak job appreciation.
‘A Good Year’
Citing a solid comeback of late in the core Route 128 submarket of Newton, Wellesley and Waltham, McCaffrey observed that investors “are feeling pretty good that the wave of activity is going to continue migrating to the north and west.” Although Trammell Crow was busy throughout suburban Boston in 2005, the investment sales group was especially prolific in the northern reaches, brokering the sale of the North Andover Mills West for Yale Properties for $58 million and helping in Berwind Property Group’s $24 million purchase of the Highwood Office Park in Tewksbury. Joseph and Phaneuf also assisted Farley White Interests in the disposition of 150 Apollo Drive in Chelmsford, an 80,000-square-foot building fully leased to Avaya Inc. It traded for $12.2 million.
Other local brokerage sales teams also benefited from the capital flow into the northern market. JP Morgan recently took a joint venture ownership stake at Minuteman Park in Andover, a deal negotiated by Cushman & Wakefield of Massachusetts, while Andover’s Brickstone Square office park was acquired by Transwestern Investment Co. from Lehman Bros. for approximately $77 million. A bit to the south in Burlington, 25 Mall Road sold for $55 million to Equity Office Properties, with that sale orchestrated by Meredith & Grew.
As for Trammell Crow, the latest trio of sales brought the volume of deals negotiated in 2005 at close to $1 billion, although a precise figure was unavailable. “It was a good year for sure,” said Joseph, whose firm also handled the sale of two high-profile Boston office buildings, 399 Boylston St. to Abbey Road Investors and BlackRock Capital for $55.5 million, and 31 Milk St., acquired by Everest Partners. The bulk of the transactions took place in the latter two quarters, said Joseph. The resiliency of the investment sales market was encouraging in that regard, he said, given that many observers had anticipated that rising interest rates and a lack of product would curb the hyperactive sales pace seen in recent years.
If anything, the fervor appears even more strident headed into 2006. McCaffrey said Trammell Crow is eyeing upward of $400 million of properties that should hit the streets in the opening quarter. Even at a sales pace that could result in close to $6 billion in property sales regionally for 2005, many investors were shut out of the process last year by heavy competition, and observers anticipate the vanquished players will be even more eager to strike agreements. Australian and European investors are expected to be busy in 2006, while the maturation of the “tenant-in-common” (TIC) program could drive in even greater capital levels, according to some predictions.
Direct Invest Inc., for example, is using a TIC structure to acquire some of its properties, such as 829 Middlesex Turnpike. Such monies emanate from sellers of properties who seek to offset capital gains taxes by investing in another property in a prescribed time frame. TIC vehicles such as Direct Invest or another local group, Ashforth Paradigm Capital Partners, have made several intriguing investments locally in recent months. The latter firm, for example, recently acquired 101 Walnut St. in Watertown after starting the process in 2004 by purchasing 212 Elm St. in Somerville.
Efforts to contact Direct Invest officials by press deadline were unsuccessful. Based locally at 211 Congress St. in Boston, the senior management includes several former executives with Wellsford Commercial Properties Trust and the Archon Group, two real estate entities backed by the Goldman Sachs Whitehall Fund that were each active in Boston during the 1990s. Principals include Robert A. Licht, Richard R. Previdi, John O. Graham and William F. Rand III.
