The Onyx Hotel in Boston is one example of the landmark deals made in last calendar year.
In Massachusetts commercial real estate sales last year, buyers grabbed just about everything nailed down.
“There was a lot of competition,” acknowledged Spaulding & Slye Managing Director Michael G. Smith, whose investment services group brokered more than $500 million of properties last year. Coming off a record pace in 2004, capital proved even more ardent towards commercial real estate in the subsequent months, leading to a surge of investors marching through Boston and into fringe markets heretofore shunned due to the region’s nagging economic slump. Although the downturn has hardly been eradicated, with some communities still beset by excess space and unsteady futures, office building volume alone was 40 percent above normal from the annual average of $2.7 billion, while the long-suffering hotel sector recorded several prominent sales, including the $318 million sale of the Westin at Copley Place, the Lexington Holiday Inn and the Onyx Hotel in Boston’s North Station, a 112-room inn sold by developer David Leatherwood for $28 million.
The total for all Massachusetts commercial real estate sales was estimated at more than $6 billion in 2005, with product running the gamut from hospitality and multi-family to retail, industrial, permitted land and even flex facilities situated in secondary locations. Such assets had garnered little interest until last year when deal-starved buyers and risk-driven players began seizing such opportunities in order to place capital, and industry observers said they believe buyers will be further pressed to beat the bushes in 2006.
Besides the sheer number and pricing of deals, the region recorded several landmark transactions in 2005 as well, perhaps the most poignant being the sale of the final piece of the Boston Wharf Co. portfolio in the Hub’s Fort Point Channel district, ending the firm’s presence there after more than 150 years. Boston Wharf at one point controlled millions of square feet in the district until its London-based parent began dumping the holdings five years ago, culminated by the sale of 17 buildings in June to a subsidiary of Goldman Sachs for $91 million. In Brookline, the historic Longwood Towers luxury apartment complex was purchased by an Atlanta firm for possible conversion to condominiums, while Somerville’s Assembly Square Mall was finally sold by Taurus Investments for $64 million, with the firm handing off a stalled redevelopment effort to a real estate investment trust.
Retail was a darling among buyers last year, according to Robert E. Griffin Jr., president of Cushman & Wakefield of Massachusetts. Senior Director Geoffrey Millerd of the firm’s Capital Markets Group represented Taurus in the sale, noted Griffin, who cited that specialty and residential property as among the most active areas for his firm last year. In the end, Cushman & Wakefield brokered $2.36 billion of real estate, a new high for a sales team that has now exceeded $2 billion in each of the past three years and again led all New England brokerage operations in the volume of deals tendered.
“We were fortunate to work on some pretty exciting transactions,” Griffin said in assessing 2005, a campaign which opened with two blockbuster deals carried over from 2004, the $175 million purchase of the Riverfront Office Park in Cambridge by the RREEF Funds and Bay Colony Corporate Center in Waltham, which fetched an astounding $272 million to go down as the highest price ever paid for a single suburban Boston office building when acquired by Beacon Capital Partners from the Shorenstein Cos.
Cushman & Wakefield also handled the $507 million portfolio sale of dozens of buildings owned by CrossHarbor Capital Partners, some four million square feet of properties acquired by the RREEF Funds. Led by Principals Edward C. Maher Jr. and Marci Griffith Loeber, the Capital Markets Group also brokered the $273 million sale of Boston’s 99 High St., negotiated a recapitalization of Minuteman Office Park in Andover and peddled two office parks in Waltham on Prospect Hill which were sold separately in December for a total consideration of $121 million.
CBRE/New England ended 2005 brokering $1.6 billion in property sales, according to Principal Gary J. Lemire, who also listed retail and residential as the busiest areas for his firm’s investment sales operation. Brokers Christopher Angelone and William Moylan completed a $339 million sale of 12 retail properties to Inland Real Estate Acquisitions, while the multi-family team of Simon Butler and Biria St. John counted the $110 million Longwood Towers sale to Atlanta-based Radco among its chief accomplishments. CBRE/New England broker David McElroy worked with Senior Vice President Elizabeth Thomas on the sale of 185 Devonshire St. to a Miami investor that plans to convert the multi-tenanted office building into commercial condominiums, while Thomas also negotiated the sale of 101 Walnut St. in Watertown to Paradigm Properties for $20.1 million late in the year.
Trammell Crow Co. was busy in 2004 on several high-profile deals, with investment group members James F. McCaffrey, Peter Joseph, Christopher Phaneuf and Jordan Berns brokering such Boston sales as 399 Boylston St. for more than $55 million, and the $18 million sale of 31 Milk St. to Everest Partners. Trammell also assisted Yale Properties in its sale of the North Andover Mills in North Andover for $58 million, brokered the $24 million purchase of the Highwood Office Park in Tewksbury and handled the just-completed purchase of the New England Business Center by the New Boston Fund for $34 million.
For Spaulding & Slye, retail and office properties encompassed most of the activity in 2005, said Smith, whose firm eclipsed $500 million despite having a more narrow focus than other operations, such as the lack of a multi-family division. Approximately 95 percent of the deals were in Massachusetts, Smith estimated, with the investment sales team again among the most active in trading Boston office buildings. Smith joined colleagues Catherine Daume and Scott Jamieson in orchestrating such notable Hub office building sales last year as 18 Tremont St. for $37 million, 2 Oliver St. for $53 million, 2 Liberty Square for $15 million and the $23 million sale of One Fanueil Hall Square, an ornate multi-use building located adjacent to Quincy Market.
The largest sale last year for Spaulding & Slye involved two office buildings in Cambridge which traded for $115.5 million. According to Smith, the source of capital was unusually broad in 2005, adding that the year bore out about as his firm had expected. “It was constant,” he said of the stream of capital, a wave Smith said has continued to flow into the new year. Despite the high volume accomplished in 2005, Spaulding & Slye carried over several property sales not finished last year, opportunities which Smith said should be consummated over the near term.
Other Boston-based investment divisions were also active in 2005, including Meredith & Grew, GVA Thompson Doyle Hennessey & Stevens, the Codman Co., Grubb & Ellis and Richards Barry Joyce & Partners, with the latter operation exceeding $300 million in property sales during its initial year with a dedicated sales team. Led by Richard Herlihy and Richard Bradbury, RBJ’s sales group traded the headquarters of Praecis Pharmaceuticals in Waltham to Intercontinental Real Estate Corp. for $51 million and ended the year by selling 313 Washington St. in Newton to Transwestern Investment Co.
Meredith & Grew negotiated the sale of 25 Burlington Mall Road for $55 million to Equity Office Properties, one of several transactions completed by the firm last year. Another locally based company active in investment sales was NAI Hunneman Commercial Co., which used its breadth of veteran talent and contacts to negotiate 61 deals in 2005 valued at $244 million. Both totals were records for the firm, said Principal Robert Tito, whose firm did 45 deals and $196 million in sales in 2004 and 55 deals worth $208 million in 2003.
“It was very active,” said Tito, listing residential and retail as leading the pack last year. Principal Carl Christie has helped shore up the firm’s multi-family sales group along with Tito, while Jonathan Aron has been contributing his retail expertise in site selection to assist clients on that end. Tito and Aron, for example, negotiated the $7.6 million sale of a Malden shopping plaza last summer, while Christie and Tito also recently completed an $11 million apartment sale in Hyannis. David Ross and Mark Hall assisted in the sale of 320 Congress St. in Boston, while Principal Peter Benke helped Gillette Corp. on an international deal in the United Kingdom valued at $31 million.
Broken down by dollar volume, one-third of all sales brokered by NAI Hunneman last year were multi-family properties, said Tito, 26 percent was office, 21 percent was industrial, 14 percent was retail and 5 percent was raw or permitted land.
