Trammell Crow Residential of Atlanta has an option to buy the development rights for this parcel, located along D Street in
One of the nation’s leading multifamily real estate companies has tied up development rights for a $140 million residential project slated for South Boston, industry sources told Banker & Tradesman last week.
Atlanta-based Trammell Crow Residential reportedly has an option to buy the highly touted complex from a joint venture of Cathartes Investments and AEW Capital Management. According to one source, acquiring the rights to build the development will cost TCR about $40,000 per unit, or roughly $27 million.
Calls to TCR’s Northeast regional office in Connecticut were not returned by B&T’s press deadline on Friday, while Cathartes principal Robert Maloney also did not respond to inquiries about the sale. Despite that, sources familiar with the negotiations insisted that TCR has been selected from a pool of well-heeled suitors who had been chasing the opportunity. “There is truth to that,” acknowledged one source close to the deal when asked of TCR’s designation.
“They see it as a good market,” the source continued, noting that TCR has yet to make a substantial foray into the Bay State. At present, the only local involvement appears to be as the manager of the Dexter Park luxury apartments in Brookline, a 409-unit property near Coolidge Corner where units cost as much as $3,100 per month. Privately held TCR builds, owns or manages rental apartments across the country, with 60,000 units under management and $2.4 billion worth of real estate assets under control.
According to the company’s corporate reports, TCR has been aggressively adding to its portfolio in recent years, with 6,000 new units begun in 2000 and another 10,000 expected to be under construction by the end of this year. TCR has developed more than 150,000 units since its inception in 1977. It operates independently from other Trammell Crow-affiliated companies, including the commercial entity which came on the Boston scene in 1998 via its purchase of Fallon Hines & O’Connor.
The National Multi-Housing Council ranks TCR as one of the top 50 multifamily companies in terms of both ownership and management. In apartments owned, the firm improved from 44th to 39th between 2000 and 2001, with 24,503 units currently under its control. The company also improved from ninth to eighth in the top 50 for units managed during that time.
Real estate investment trusts continue to dominate the top spots among the country’s multifamily powerhouses, according to NMHC. Apartment Investment and Management Co. leads the list with its ownership interest in 265,000 units, followed by Chicago-based Equity Residential Properties Trust at 225,000 units. As with the commercial real estate industry overall, the residential sector is becoming increasingly consolidated, a trend underscored by the 2.65 million units now owned by the top 50 companies. That block of companies increased its holdings by 3 percent in 2000, NMHC estimates.
Given the dearth of supply and the region’s strong economy, Greater Boston has increasingly become a target for investors seeking multifamily properties. In recent years, such high-end developments as the apartments at the Prudential Center, Museum Towers in Cambridge and 2000 Commonwealth Ave. in Brighton have all been taken over by leading national concerns. Equity bought a major stake in Charles River Park, while Archstone Communities and AvalonBay Communities have also been growing their presence throughout metropolitan Boston since the mid-1990s.
Zoning Battle
The South Boston deal supposedly attracted many of the major companies. Although the parcel presently has a stark, industrial feel to it, with overgrown grass and debris littering the landscape, many industry observers say they see the proposal as an eventual winner, especially since it is fully permitted and has close proximity to downtown Boston and the emerging Seaport District.
Located along South Boston’s D Street, the project is approved for 565 apartments and 65 below-market condominiums, the latter added following negotiations with South Boston community groups. Another 65 lower-priced residences would be built on the property by a nonprofit developer, although it is unclear whether they are factored into the sales price of the development rights.
Cathartes and AEW persevered through an oft-contentious battle with the neighborhood and city officials, ultimately winning approvals to build the project last October. It was a short time after the zoning victory that Cathartes/AEW confirmed they were placing the rights up for sale.
The announcement that Boston-based Cathartes was divesting of the project caught many off guard, but it fits right into the company’s normal strategy to get in and out of a deal as quickly as possible. In recent years, Cathartes has worked that approach as well as anyone, selling nearby 451 D St. last year for $52 million and disposing of a Somerville telecommunications development last summer, just before that market fell upon harsh times. The new owner of the Somerville project, TrizecHahn Corp., has suspended work on the development due to weakened market conditions.
