Lafayette Corporate Center, which may command as much as $140 million today, fetched only $17 million in a 1991 foreclosure auction.
For the longest time, it was Boston’s real estate version of Rodney Dangerfield, but finally, Lafayette Place is about to get some respect – in a big way.
According to industry sources, the developers who converted the failed mall into a mix of office and retail uses are putting the 615,000-square-foot complex up for sale, with some predicting the asset could fetch upwards of $140 million. If so, that would be a far cry from the $17 million the property sold for at a foreclosure auction in February 1991.
Sol Barket, who led the redevelopment effort with brother Keith, did not return phone calls last week from his Chicago office, while brokers at Trammell Crow declined comment on rumors that the firm’s investment team has been retained to market the building. Several industry sources insisted the property is in play, however, including one observer who called the reports “pretty accurate.”
“That’s basically what’s going on,” said the source. “It’s out there.”
Now known as Lafayette Corporate Center, the property had been shuttered for years when the Barkets stepped forward in 1997 to acquire the development with an eye toward a movie and entertainment facility. When that notion received a tepid response, the team turned its efforts toward a mix of retail and office space, ultimately creating a ground-floor retail strip of 80,000 square feet and the addition of several floors of office space above.
The reconfigured plan received strong backing from city officials interested in seeing new life for the Downtown Crossing shopping district. Those goals were answered when State Street Corp. and MFS Investment Management inked major long-term leases for the office space, with State Street taking 400,000 square feet and MFS the remaining 135,000 square feet.
Given the silence from the owners, it is difficult to gauge the motivation for selling the property at this juncture, but some investment analysts said they believe the timing is perfect given Lafayette’s solid tenant lineup of two leading blue chip companies. Unlike 2000, when investors were willing to take greater risks in a strong leasing climate, the softening of the commercial market is quickly creating a flight to quality for many buyers. According to one Hub broker, few assets can match the stability offered at Lafayette.
“That’s going to be easy,” the broker said of attracting buyers. “It will be like trading a bond.”
Interestingly, the deal may also reflect the resiliency of the city’s so-called old-line firms compared to the technology sector, which was supposed to drive the region’s economic engine into the new millennium. While Lafayette Corporate Center is likely to see a range of investment interest, an adjacent property repositioned as a telecommunications center is expected to receive far less attention as it also goes on the market.
‘Tough Asset’
That property, known as One Summer St., was purchased by California-based Markley Stearns two years ago from Macy’s Department Store. The retailer subsequently reduced its space to the lower levels of the building, while Markley Stearns successfully leased up the remainder of the property to various telecommunications service providers. With many of those firms now struggling amidst the high-tech shakeout, however, sources say the creditworthiness of the leases are so suspect that it is hard to place a value on the deal, especially with much of the space unfinished and network access still limited.
“It’s a tough asset for sure,” said one industry source familiar with the property. Lehman Brothers is supposedly marketing the building. Calls to officials there and to Markley Stearns at its California office were not returned by Banker & Tradesman’s press deadline.
In any event, the repositioning of the former Lafayette Place mall does finally appear to have been successfully completed, and comes at a time when the entire Downtown Crossing is undergoing a dramatic rebirth. Compared to a decade ago, when the mall was on its final legs and city officials demolished several nearby buildings in a desperate effort to reverse an economic free-fall, the district today is attracting a surge of development dollars.
Just last week, for example, a new cinema complex opened a few doors down from Lafayette, with a new Ritz Carlton and luxury condominiums slated to follow over the near term. Emerson College has been busy moving its campus from the Back Bay to several blocks in the surrounding Midtown area, while an announcement on a developer for the city’s prime parcel known as Hayward Place is expected any day.
“It is really unbelievable what is happening,” said one real estate broker. “There’s more money being spent in that area of town than anywhere else in Boston right now, and that includes the [Seaport District],” considered the Hub’s next great development frontier.
As a mall, Lafayette Place lasted less than 10 years, opening in 1984 and finally closing in the fall of 1993. In between, the project by Montreal-based Mondev Corp. became a laughingstock of the retail industry, derided for a confusing layout, poor security and a windowless facade that did little to shore up its presence along Washington Street. The new retail space has been configured to increase foot traffic along that thoroughfare, and is expected to benefit by the opening of the $400 million Millennium Place complex. One retailer already in the Lafayette property, Eddie Bauer, has reportedly enjoyed wide success, while deals to add another clothing store and a restaurant are said to be nearing completion.
