Boston’s economy might not be particularly healthy these days, but despite the recent difficulties, it appears there is still investor interest in the city’s office market.
According to sources, suitors have approached the owners of One Boston Place in hopes of buying out the joint venture partnership of Walton Street Capital and Blackstone Real Estate Advisors. Along with J.P. Morgan Investments, at least one other domestic fund is said to be bidding for the 41-story tower, which is located in the heart of the Financial District.
“It fits the profile of what we’re looking for in Boston right now,” J.P. Morgan investment specialist Justin Krebs told Banker & Tradesman last Friday. While he would not specifically address the issue, and indicated his firm has not solidified any agreement, Krebs said J.P. Morgan is attempting to seek out stable office properties for investment, even if they are not being actively marketed.
Indeed, sources said the owners of One Boston Place did not place the building up for sale, but instead were approached by potential buyers. One ironic aspect of the 2002 commercial investment market has been an unusually low supply of product available for purchase, with many owners satisfied to sit on their properties until market conditions improve. In order to generate deals, therefore, many investors are cold-calling to see whether an arrangement can be accommodated.
“There definitely are groups that are out looking for buildings and seeing whether it makes sense to [make an offer] on them,” said Krebs. “We run into them all the time.”
Although real estate has been hit hard in recent months, Krebs explained that many investors still see it as a safe haven for the long term, especially if one is able to acquire assets that have strong credit tenants and lengthy lease terms. That is a far cry from 2000, when rents were escalating so fast that buyers preferred buildings with vacancies coming forward.
Calls to Walton Street Capital in Chicago and Blackstone in New York City were not returned by Banker & Tradesman’s press deadline. If a sale were to go forth, it would mark an unusually short holding period for the building, which the two companies acquired in September 2000 for $191.3 million.
Interestingly, the last flip of a major downtown Boston office tower occurred in 2001 when Walton Street joined Westbrook Partners in buying 99 High St. from Boston Capital Institutional Advisors. BCIA had only held that building for a year before trading it. The company had paid $168 million for the tower, but sold it for $219 million.
One Boston Place is considered one of the best-located towers in the Hub, but at 31 years old, it was also seen as being in need of a major facelift and renewed leasing efforts. That upgrade is currently in place, while the owners have also been successful in solidifying the building’s tenant base. That effort scored a major coup recently when Mellon Financial Corp. signed a long-term lease renewal and expansion that brings its space occupied in the building to 350,000 square feet.