Bayview Financial LP, the Florida-based firm that spearheaded the development of downtown Boston’s first office/condo project in decades, has sold the building, which is located at 185 Devonshire St., at a $4.5 million loss.
Bayview scooped up 185 Devonshire out of foreclosure in December 2005 for $13.8 million. At the time, the purchase was a bargain – the 11-story, 79,000-square-foot property had last been sold in 2001, for $18.75 million.
The building was less than half occupied, and Bayview set about sinking another $3 million into a renovation and office condo conversion project. That endeavor initially met with success – within months of the renovations’ completion, Bayview had sold eight office condo units for a total of more than $7 million.
However, the Florida firm hasn’t moved a single unit since December 2007. It recently cut its losses, unloading the remaining 25 unsold office units to local developer Michael Rauseo for a total of $5.1 million.
Rauseo last made headlines in September 2006, when he auctioned off 31 residential condo units at his Folio development on Broad Street. The bold strike drummed up $24 million in sales – nearly $780,000 per unit – in two hours.
Now, Rauseo is moving quickly to get bodies into 185 Devonshire. He’s pushing the 1,000- to 6,000-square-foot office units with free rent through the end of 2009, easy financing and the option of buying, leasing, or leasing-to-own.
Rauseo said that since acquiring the building, he has put two units under agreement, and he expects to land another three or four this month. He’s confident that, by pricing aggressively, he’ll fill the building by the end of the year.
“I firmly believe, on sales or leasing, this is the best deal in Boston now,” he said.
“Flexibility has become the watchword of the industry,” said the project’s broker, Jeff Becker of NAI Hunneman. “There are two distinct creatures: buyers and tenants. Often, buyers are formerly, or currently are, tenants. This gives them a seamless way to move in, and the flexibility to give them the time it takes to buy.” Becker added, “In lease negotiations, that flexibility has become the norm. It’s the leaders who get the first opportunities, and oftentimes, the leaders are the ones who get the tenants.”
Becker has seen landlord concessions mount steadily across downtown Boston. Free rent is not only commonplace: it’s now being annualized. Blend-and-extend lease arrangements are “happening on a regular basis.” And landlords aren’t just fronting moving costs; they’re now getting involved in funding IT and other infrastructure improvements.
He calls 185 Devonshire “the needle in the haystack.” When he spoke to Banker & Tradesman one afternoon last week, he’d just wrapped up four scheduled showings, and two walk-ins.
“It’s a standalone in the market,” he said. “Office condo sales are usually spotty and spread out. It’s one concentrated project – we haven’t seen this since 160 Federal, in the ’80s.”
Back To Bayview
Bayview Financial’s primary line of business isn’t real estate development; it’s mortgage aggregation and securitization – a field that has all but collapsed.
The Blackstone Group has a minority stake in Bayview. Last August, the equity giant raised $2 billion for Bayview for the purposes of scooping up portfolios of distressed subprime mortgages. At the time, Tony James, Blackstone’s president, said in a conference call he expected subprime-related financial havoc to be peaking.
In December, federal agents arrested a former Bayview partner, Steven Gordon, for wire fraud. Federal prosecutors allege Gordon inflated his own commissions by falsely inflating the value of residential loans that Bayview repackaged and sold to investors. Bayview told securities regulators that Gordon’s alleged fraud has cost the firm $66 million.
Bayview had no comment.
