Despite recent reports that Lend Lease Real Estate Investments has locked up a deal to purchase One Beacon St. in Boston, brokers handling the sale say at least one other bidder is still in the mix to acquire the 1.1 million-square-foot office tower.

It’s close but no cigar for a pair of high-profile office building sales in Boston involving Lend Lease Real Estate Investments, including the advisory firm’s efforts to purchase One Beacon St.

Despite some reports that Lend Lease has won a spirited competition to buy the 34-story office tower, brokers handling the sale said late last week that such is not the case. “They definitely do not have it,” said Robert E. Griffin Jr., New England division president of Cushman & Wakefield. “It’s not a done deal at all.”

Griffin said the field has been whittled down to two finalists including Lend Lease, but he stressed that negotiations are ongoing with both parties and said talks are expected to continue in the coming days. He declined to give further details. One Beacon St. is currently owned jointly by Prudential Real Estate and Westbrook Partners.

On the flip side of the table, Lend Lease is brokering the sale of 50 Milk St. in Boston on behalf of its client, a state of Florida pension fund. According to sources, the centrally located office building is receiving such solid interest from several suitors that it will approach or possibly eclipse the $400-per-square-foot mark when it finally does trade. Were it to attain that price, that would equate to a sales level of $104 million. The pension fund paid just $55 million for 50 Milk St. in 1997, or about $207 per square foot, so a sale near $400 per square foot would reflect an amazing return in five years.

“It’s a big price, but that’s a pretty secure deal,” said one Boston investment specialist who has been following the sale of the 21-story building. “It’s a very stable [asset].”

‘Priority Target List’

The real key to attracting such ardor from investors is 50 Milk St.’s lead tenant, with Brown Brothers Harriman occupying approximately 80 percent of the 258,000-square-foot building on an unusually long-term lease, said by some to still have 15 years remaining. Calls to Boston’s Lend Lease office were not returned by Banker & Tradesman’s press deadline, but sources said they believe Lend Lease has narrowed the finalists in the sale negotiations to three potential buyers, including players representing a mix of overseas and domestic capital.

While Lend Lease is brokering the 50 Milk St. sale itself, and Griffin could not offer specific details of those negotiations, he said he is not surprised that the building would challenge the $400 per-square-foot milestone, one typically achieved locally only in smaller, boutique-style buildings. With the stock market in turmoil, many investors are flocking to commercial real estate as a safe haven, but Griffin explained that the more risk-adverse investors will only do so if they can find a core, stable asset that will allow them to ride out the current economic turbulence such as the Hub is currently experiencing.

“There’s never been a higher premium paid for credit and term than there has been in this marketplace,” said Griffin. “That’s what people are looking for today, and they will absolutely pay to get it.”

Certainly Boston’s office market has fared considerably better on the investment end than many would have thought given the continued rise in vacancies and a rental rate drop that in some cases is nearing 30 percent from the peak levels seen in mid-2000. But advisors such as Jeff Miller of CB Richard Ellis Real Estate Investors report that both domestic and overseas clients are clamoring to get into the market no matter which way the fundamentals are headed. Miller’s firm is currently representing one German open-end fund, Deka, as it scours the Hub for potential opportunities, one of only five U.S. markets the investment group is considering.

“As it is for most foreign investors, Boston is on the top priority target list [for Deka], especially the downtown,” said Miller, who has also been active locally with a state of California pension fund, Calsters.

Both abroad and in the United States, Miller said the struggles of the stock market have meant good things for real estate, with investors seeing it as a stable place to keep their funds. Deka has raised $3 billion in the first half of 2002, said Miller, much of which will be setting its sights on buying into the U.S. real estate market.

Still, to date Deka has not made any local acquisitions, even though Miller said they have looked at a number of prospects and continue to pursue opportunities. The difficulty thus far, he said, has been the pricing of the deals, with the client unwilling to match lofty seller expectations.

“The bid/ask spread is a problem in Boston right now,” he said. “Most owners are not under pressure to sell, so they feel no need to [lower] their pricing.”

Nonetheless, Miller said Deka and other German funds can offer substantially higher returns for individual investors than what can be found in the homeland. New changes afoot will allow such funds to invest vastly greater sums outside Europe, a trend that should mean another infusion of capital as the year progresses.

Deka typically looks at deals in the $50 million to $200 million range, and thus was not a candidate for One Beacon St. According to sources, however, Austrialian-based Lend Lease is up against another foreign investor as it angles to purchase the 1.1 million-square-foot tower. Although Griffin would not discuss the matter, sources estimated the sale would be in the $330 million range. It is one of two leading Boston office towers being marketed right now, with Teachers Insurance and Annuity Association said to be teaming up with a Canadian fund to purchase One Boston Place. That deal is being brokered by Spaulding & Slye Colliers and is expected to be finalized in the coming weeks.

While not as centrally located as One Boston Place, and without the same credit-tenant roster, One Beacon St. is expected to do well when the winning bidder is selected. “There was a lot of interest in that building,” concurred one observer. “It’s well located and there aren’t many towers on the market in the city.”