It is said that “almost” only counts with horseshoes and hand grenades, but it also appears a close call can occasionally be lucrative in the commercial real estate industry as well, as witnessed in the case of the failed mega-lease at Boston Internet City in Allston.

A decision earlier this month by Globix Corp. to cancel its 450,000-square-foot agreement for the $100 million telecommunications facility may not have been what the developers and other members of the project team wanted to hear, but that does not mean it is a complete disaster for the participants, either. According to industry observers, the signed lease document should guarantee at least a partial payment of the generous fees that would have been reaped had the 15-year deal been fulfilled.

“There shouldn’t be any long faces over that one,” said a Boston real estate broker who estimated that Globix is on the hook for millions of dollars in commissions and a buyout of its agreement. “Most people would jump at the chance” to have been involved.

New York-based Globix, which provides such services as Web hosting, e-commerce support and Internet broadcasting, quashed its move to the Allston property after being battered on Wall Street in recent months. The difficulties demonstrate just how quickly business conditions can shift, especially given the ebullient atmosphere which existed when the developers, Cabot, Cabot & Forbes, first announced the deal in June. The darlings of the real estate industry for much of 2000, high-tech companies are suddenly retreating, with demand for telecommunications data centers tailing off virtually overnight.

Landlord broker Austin W. Smith and Globix agent Leigh Freudenheim cited confidentiality clauses in declining to discuss the specifics of their agreement. Freudenheim, however, did acknowledge that he and his colleagues were compensated sufficiently for their efforts, maintaining that “everyone is going to be fine.”

“We got paid a lot of money on that,” Freudenheim said. “I’m not unhappy at all over the deal.”

While Freudenheim and Smith would not elaborate further, industry sources said they believe the brokers were paid half of their commission at the lease signing and would have received the remainder upon Globix occupying the building. The full commission to be paid the brokers was “in seven figures,” according to one source.

Although one source said that the Globix agreement was “definitely” structured for a 50/50 payment on the commission, Robert Nahigian Jr. of Auburndale Realty Co. said such is not always the case. Nahigian, who teaches regularly on the commercial real estate industry, said there is no set formula for how a broker gets paid, with some receiving the fee at the lease signing, and others compensated on a staggered basis. There is a philosophical argument in the industry on whether the broker should be paid in full regardless of what happens after a deal is completed, Nahigian said, adding that there is no standard arrangement because that could be in violation of antitrust regulations.

On the developer’s end, Nahigian said it would depend largely on how far along construction is as to whether a lease buyout would benefit the landlord. CC&F began construction almost immediately after the lease was finalized, with Smith estimating that tenants could begin moving into the property by early summer.

No Pain
Rumors of a lease buyout have been running rampant in recent days. Several sources have said the amount could be as high as $36 million, but others maintined it will be significantly under that mark, perhaps based on one or two year’s worth of rent, which could mean anywhere from $12 million to $26 million. A source close to the negotiations maintained that the developers “aren’t going to be hurt at all” by the Globix retreat, but would not provide a precise figure on the buyout.

CC&F President Jay Doherty would not address the Globix negotiations, except to say that “the building is available for lease directly” from his company, indicating a buyout has been completed. Even with the disappearance of the tenant, Doherty expressed optimism about the project’s future, with its location and planned amenities already generating interest from other prospects.

“We can’t complain about the initial market activity at all,” he said. “It’s strong, its sustained, its substantial and its Christmas … Right now, we feel very good about where we are.”

Smith, a broker at CB Richard Ellis/Whitter Partners, said he believes the real key to a successful outcome will lie in retenanting the building, maintaining that the very factors which attracted Globix to the property should help in the renewed leasing campaign. The former warehouse features close proximity to both downtown Boston and Cambridge, is serviced by a Boston Edison electric substation 2,000 feet away and has a major fiber-optic line running right in front of the structure.

“It’s a world-class building,” Smith said, adding that, “Activity is excellent and we view [the Globix departure] an an opportunity.”

“Construction has accelerated” in recent weeks, he said. “Right now, we’re very busy with several proposals.”

Freudenheim agreed that the CC&F project is among the most viable to successfully lease up, but some observers say the return of the space to the market could put the brakes on other telecommunications centers. Fueled by the activity seen earlier this year, many property owners had jumped on the telecom bandwagon, seeking to convert their buildings for such use. One investment sales specialist, however, said those efforts have been stopped in their tracks.

“I think the business is going to be at a standstill for awhile,” said the broker. “The product that is already there is going to need to be absorbed before anyone else is going to do more telco, no doubt about it.”

Freudenheim, who has turned his attention full-time to the technology industry, did agree that the recent financial difficulties have slowed momentum in that area, but he remains optimistic for the future, calling the current situation “a mere hiccup.”

“The fundamentals will drive technology as it applies to real estate,” said Freudenheim, a principal at Meredith & Grew. “People are a little gunshy right now, but this industry isn’t going anywhere.”