The two-tower International Place office development in Boston reportedly is being shown to prospective buyers.
In what would continue a trend of high-profile Hub tower deals, the massive International Place office complex in Boston’s Financial District is being positioned for a possible sale, industry sources told Banker & Tradesman last week. Others said a deal with a new buyer may even be close to being signed.
Developer Donald Chiofaro did not return phone calls to discuss the matter last week, but sources claim the ownership group has been quietly peddling the pair of adjacent properties to a select group of bidders in recent weeks. It is unclear what the asking price might be, but some observers maintained that the 1.7 million-square-foot asset could establish a record for Boston office towers.
“This is a great market to sell a property like that in,” opined one source. “It’s a once-in-a-lifetime opportunity to do that deal.”
Investment sales expert Robert E. Griffin Jr. concurred with that outlook, predicting that International Place should “easily” eclipse $400 per square foot if and when it is traded. Griffin, who declined to say whether he has heard rumors regarding a sale, said it would be the first Financial District office tower to command the $400 per-square-foot rate, a figure that would place the transaction at or above $680 million.
‘Hottest’ Market
A principal at Trammell Crow who has handled some of the city’s premier tower sales in the past few years, Griffin said Boston continues to attract a slew of capital from the investment community, with many players available who would possess the clout and resources to acquire International Place. Even with the national economy on the wane, and some cities considered overbuilt in regards to office product, Griffin said Boston remains on the radar screen of most investors.
“Boston’s [Financial District] is one of the hottest markets in the world right now,” said Griffin. “There aren’t very many markets in the country right now that are as liquid.” This year alone, the city has seen several prominent tower sales completed, keeping pace with an active 2000 campaign. The most recent deal was last month’s $375 million purchase of One Federal St. by Atlanta-based Jamestown.
International Place itself also has the cache to attract investors, Griffin said. The unique design, wealth of amenities and proximity along the soon-to-be-depressed Central Artery would make the property a desirable target among most of the industry’s top players, Griffin explained.
“I would say it is one of the top five towers in the city, and some would say it is No. 1,” said Griffin. “It certainly has all the bells and whistles.”
Finance specialist George J. Fantini Jr. of Fantini & Gorga in Boston agreed that International Place would attract significant attention, saying “there’s no question there’s plenty of money out there for it.”
“For an asset of that quality and prominence, there’s clearly going to be interest from domestic pension funds and foreign investors,” Fantini said, adding that, “It’s not so much a question of the capacity to buy it, it’s more going to be a question of agreeing on the price.”
Fantini said he was also unaware that International Place is in play, but other sources insisted the property is being shopped about, with one claiming that the owners are in discussions with a potential suitor.
“From what I understand, someone is talking very seriously with them,” said the source, calling those negotiations “far down the road” to completion. At this point, however, it is unclear whether any formal agreement has been inked, with the source noting that such a large asset would likely take some time to reach the commitment stage. The uncertain economy has made buyers especially wary when acquiring commercial real estate, expanding the time it takes to complete a deal.
Whatever the status, the sale of International Place would change the local real estate landscape dramatically, especially given Chiofaro’s strong identity with the complex. He and partner Ted Oatis overcame years of difficulty and substantial odds to not only gain development approval to begin building the towers in the mid-1980s, but also to see the construction through to completion. After One International Place opened successfully in 1986, the smaller Two International Place was nearly quashed when the Hub was hit hard by the recession of the early 1990s.
Confounding their many critics, Chiofaro and Oatis were able to guide the second tower to completion, then staved off an effort by the lender, Teachers Insurance and Annuity Association, to back out of permanent financing for the 750,000-square-foot structure. After Chiofaro and Oatis aggressively fought the effort, TIAA later agreed to restructure the loan, although the developers reportedly did see their ownership position in the property diluted substantially. The majority partner in the project is Pittsburgh billionaire Henry Hillman, who has had his own legal wranglings with Chiofaro and Oatis.
No matter what the challenges, however, most observers agree that International Place not only changed the boundaries of the city’s Financial District, it also established itself as a prime destination for some of the city’s top companies, its tenant roster reading like a Who’s Who of the Hub’s most established firms. Rental rates are at or near the top levels seen in the country.
“It’s just a great project all around,” said one source. “It’s a real gem.”
