Accented by last week’s selection of a buyer for Boston’s One Federal St., sales of Hub commercial buildings are seemingly even more robust to begin 2006 than they were a year ago, with a slew of transactions nearing completion in both downtown and several fringe districts.
In the North End, for example, a 3-story office building is being acquired by CrossHarbor Capital Partners for $10.1 million, well above the $2.4 million that 585 Commercial St. fetched at auction in 1991 after the 41,000-square-foot asset was taken over by the Federal Deposit Insurance Corp. Being purchased vacant this time around should actually be a plus, maintained broker Cappy F. Daume of Spaulding & Slye, given that the new owners can feed off either the office or residential market, enhanced by the building’s proximity along Boston Harbor.
“It’s a killer residential site,” said Daume, a managing director at Spaulding & Slye. “That is definitely an option to be considered.” Spaulding & Slye is representing the sellers, a law firm that acquired 585 Commercial St. in 1998 for $4.6 million. The current sale figure equates to a hefty $246 per square foot. Daume is negotiating the sale along with colleagues Michael G. Smith and Scott J. Jamieson.
CrossHarbor Capital Partners is a Boston-based real estate investment and management company that last year sold a portfolio of 47 New England buildings for $507 million. Efforts to contact company officials by press deadline were unsuccessful. Daume said she anticipates the sale of 585 Commercial St. will close by the end of the month.
Another pending buyer with flexibility is Meritage Properties, which is acquiring 195 State St. in Boston’s Financial District for $5.7 million. The 7-story, 24,000-square-foot building fronts one of the city’s most bustling business areas, and is also close to Faneuil Hall and the waterfront. Several office leases are in place through 2009, but Daume said she believes the ability to convert the asset to residential over time offered additional comfort for Meritage, a New York-based real estate investment firm which last year purchased the nearby 18 Tremont St. office building for $37 million, a deal also handled by Spaulding & Slye.
“It’s always nice to have multiple strategies,” said Daume, who is brokering the 195 State St. sale with Smith, Jamieson and Gail McDonough. A presence along the future Rose Kennedy Greenway was another attraction for suitors of 195 State St., said Daume. Besides residential, hotel and lower-floor retail are also possible uses for the building, which has floor plates averaging just under 4,000 square feet.
‘Great Bones’
While residential is a strong possibility for 585 Commercial St., and downtown properties continue to draw attraction for that purpose, Daume said a recent improvement in Boston’s economy is giving investors confidence for retaining buildings as office space. After an estimated 2 million square feet of space was trimmed from the office inventory for residential and other uses following the market downturn that began in 2001, Daume said office-focused investors have returned in a flourish. “Now that office rents are increasing, people can justify the numbers [to keep the property as is],” said Daume.
Perhaps the most dramatic example of the rebound can be found in the battle for One Federal St., which owner Jamestown last week agreed to sell to Tishman Speyer Properties for more than $470 per square foot. The sales price, well above the $500 million opening target for the 1.1 million-square-foot tower, will be among the highest marks ever paid for an office building in Massachusetts. Being negotiated by Cushman & Wakefield of Massachusetts, the sale of the 38-story office tower to Tishman Speyer was initially announced last week on Banker & Tradesman’s Web site, beta.bankerandtradesman.com. The New York-based buyer outlasted finalists Brookfield Properties Corp. and the Abbey Group of Boston after being trimmed from a bevy of bidders.
Robert E. Griffin Jr., president of Cushman & Wakefield of Massachusetts, would not discuss the pending deal on One Federal St. when contacted last week, saying only that “we are making progress toward a sale.” The company’s Capital Markets Group fielded numerous bids for the asset, including several who reportedly offered more than $515 million. Industry observers not only marveled at the substantial price, but also the swiftness of such a large sale. “It did move awfully fast,” concurred one Boston investment sales broker tracking the deal.
Despite the age of One Federal St., which was among the city’s first towers when it opened in 1975, most spoken to maintained that the investor interest is warranted. When Fidelity Investments departed from the building last year, some opined that One Federal St. could not meet the technological demands of 21st century companies, but that notion was seemingly erased late in 2005 when leading law firm Bingham McCutcheon LLP inked a long-term, 320,000-square-foot pact, bringing occupancy to nearly 100 percent.
“The building has great bones,” Daume said of One Federal St. Besides being well-constructed, Daume cited the centralized location in the heart of the Financial District and the upkeep of the asset by Jamestown and partner ING/Clarion for the building’s overall success. “It is an excellent tower,” said Daume.