The $403 million sale of 53 office and flex buildings by MGI Properties led the top 25 commercial real estate transactions of 1999 in Massachusetts, according to an overview compiled by Trammell Crow’s Investment Services Group. Released last week, the report showed the total for the top 25 deals at $2.97 billion, up 12 percent over the 1998 figures.

One interesting aspect of the 1999 deals was the variation of product types, with a blend of downtown office, suburban flex and luxury multifamily properties included in the list. The largest single asset traded was the 76 percent ownership stake in Boston’s 125 High St., a 1.4 million-square-foot office complex that fetched $375 million. Other sales included the Grenada Highlands apartment development in Malden by Equity Residential ($128 million); Fidelity’s acquisition of the Hub’s 245 Summer St. office building from Stone & Webster ($187 million); and Modern Continental’s purchase of a Class B office building at 470 Atlantic Ave. in Boston ($53.5 million), a property it plans to restore into first-class space.

There was a real mix, acknowledged Trammell Crow investment broker Marci B. Griffith, adding that the diversity reflects a new attitude among investors, whom she said today are looking for value-added first, asset class second.

Whereas real estate investment trusts tend to focus on one particular sector, Griffith said that is not the case with the pension fund advisors and insurance companies who were among the most active players in Boston last year. The funds are expanding the [type of] property they will buy because they want the yields, Griffith said.

Pension funds were indeed the dominant investors of the top 25 last year, buying 40 percent of the assets. REITs were a distant second at 16 percent, with no trophy deals, except for multifamily acquisitions, after leading the charge in 1998. Domestic syndicators, who are expected to be major investors in 2000, represented 12 percent of the volume, as did local owners such as Boston Capital. Foreign investors and users each came in at 8 percent, followed by Wall Street investors, who acquired 4 percent of the assets.

Mirroring the variation of buyers and product types was an eclectic deal cycle in 1999. Although Trammell Crow enjoyed an unprecedented second straight year of completing investment sales over $1 billion, finishing at $1.1 billion, principal Robert E. Griffin Jr. said activity fluctuated throughout the campaign. There were, he said, ebbs and flows of momentum, with interest hot at one moment and cold the next.

Except for 1992, it was the hardest year we’ve had for getting deals closed, Griffin said. It was very difficult to get things across the finish line.

Even with the $1.1 billion in volume, for example, Trammell Crow estimated that another $500 million of deals in the pipeline were either quashed or shuttered into 2000, as with last month’s closing of 99 High St. by Boston Capital. That $168 million sale, which Trammell Crow brokered, typically would have closed by year-end, but Griffin said the gestation period for such sales has increased. Whereas investment sales traditionally have taken between three to six months to complete, Griffin said sellers should now anticipate a process that could run from six months to a year.

Today, you really need a lot of patience and nerves of steel in negotiations, he said, adding that sellers must also be more attentive to how they initially price their assets. Despite Boston remaining one of the top commercial markets in the country, Griffin said strict underwriting and other factors have made buyers far more cautious than in the boom years of the mid-1990s.

Even still, Trammell Crow investment broker Edward C. Maher Jr. noted that the market fundamentals for Greater Boston’s real estate industry are as strong as they have ever been. The office sector is experiencing both record-low vacancies and unprecedented rental rates, the multifamily market is enjoying similar trends; and retail has rebounded strongly after several soft years.

The irony is that our [office] leasing guys say they have never been more busy, Maher said.

Median Price Dips
One continued trend for the top 25 was the rising average sales prices of the deals. Transactions averaged $118.7 million in 1999, up from $106 million last year and $71.6 million in 1997. The median sales price, however, was actually down to $52 million after a $76 million median in 1998.

As mentioned, residential REITs were the most active locally in 1999, with Equity also buying Longfellow Place in Boston, a 710-unit luxury high-rise purchased for $237 million. Archstone Communities paid $44.6 million for the 312-unit Arboretum in Burlington, and has reportedly just closed on the Village at Bear Hill complex in Waltham.

Geographically, Boston, Cambridge and Waltham were all well represented in deals last year, with nearly half of the sales occurring in the Hub’s Financial District. Those 12 tower deals, which included the $265 million sale of 265 Franklin St., the $366 million sale of 100 Federal St. and the 125 High St. deal, comprised more than 57 percent of the total dollar value of the top 25.

As opposed to previous years when the office market ruled, Cambridge’s sales activity was topped by the Clarion Partners acquisition of Museum Towers. The 435-unit, twin-tower luxury apartment development sold for $108 million, or $248,000 per unit. In the Alewife section, 125 and 150 CambridgePark Drive sold for $84 million, while Two Canal Park fetched $51.8 million.