In the latest example of strong investment interest in Cambridge, a Texas development firm and California pension fund have reportedly agreed to buy the Riverfront Office Park. Located at the gateway to Kendall Square, the Class A buildings at One and 101 Main St. were placed on the market just a few months ago by Blackstone Real Estate Advisors.
“That’s a pretty good rumor,” one Boston real estate broker said last week of the supposed deal, which has Hines Interests and the California Public Employees Retirement System (Calpers) paying an estimated $325 per square foot for the development. At that rate, the 665,000-square-foot complex would be acquired for about $215 million.
A Calpers spokes-man referred questions to Hines, which was selected two years ago to manage the pension fund’s office investment program in the Eastern and Northwestern United States. Reached in the company’s Boston office, Hines Vice President David Perry declined to discuss the matter, saying only, “It is a company policy not to comment on things we may or may not be doing.”
In any event, several industry investment brokers said they have heard the same names connected to the sale, with one calling the per-square-foot figure “a good number for everybody.”
“It would be a good deal for both parties,” said the source. Whereas some early reports had indicated that Riverfront was on the block for $400 per square foot, many observers predicted it would never command such a lofty sum, one which would have been a record for Cambridge on a sale that large.
While perhaps not as glitzy or well-located as Riverfront, other recent Cambridge office buildings have traded in the $200- to $225-per-square-foot range. Just last month, for example, Capital Properties of New York paid $226 per square foot for 215 First St., a 300,000-square-foot office rehab near the Riverfront development. Located directly across the street from Riverfront, One Memorial Drive sold two years ago for about $300 per square foot, at the time a record for the market.
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The pace of the sales is another indication of how eager investors are to get into the 11 million-square-foot Cambridge market. Capital placed 215 First St. under agreement barely a week after it was offered for sale, while Riverfront was only out for a short time before gaining its reported suitor.
With the Massachusetts Institute of Technology and Harvard University serving as major draws for a host of telecommunications, biotechnology and high-tech companies, Kendall Square has seen rents skyrocket in recent months. Insignia/ESG reports that the market is now attaining rates above $60 per square foot. Indeed, one tenant broker said last week that he has heard of two deals just completed at One Main St. that have reached the $65 per-square-foot mark.
If the deal does go through, it would be a somewhat ironic development, given that Blackstone has replaced Hines as the leading candidate to buy One Boston Place in the Hub’s Financial District. Hines had that 41-story property under agreement last year, but backed out at the final moment when Lend Lease Real Estate Investments reportedly balked at efforts to change the sales price late in the process. Blackstone and Walton Street Capital of Chicago are said to be close to wrapping up the 770,000-square-foot One Boston Place for between $190 million and $200 million.
One Main St. is the older of the two towers, having opened in 1983. It features 340,000 square feet of space on 18 floors, while the 13-year-old 101 Main St. has 326,000 square feet on 14 floors. Each property comes with 200 indoor parking spaces, a valuable commodity in the Cambridge market and one that is seen as contributing to the purchase price.
Although neither Hines nor Calpers would discuss the Riverfront situation, the two have participated in a number of investment and development projects since Calpers selected Hines two years ago. Under that arrangement, Hines agreed to co-invest equity with Calpers in both existing and future office investments.
This spring, Hines and Calpers began construction of a 40-story office tower in Seattle, while the two entities acquired 50 Fremont Center in San Francisco last month. That deal marked the ninth such deal the two companies have collaborated on since their union, according to a Calpers press release.
