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A Compendium of Property & Capital News
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A Compendium of Property & Capital News

Morgan Stanley Buys Out Equity

August 02, 2013

BOSTON—In one of downtown Boston’s most important real estate exchanges of its kind ever, Equity Office has agreed to sell its stake at One Post Office Square to partner Morgan Stanley for a price said to exceed $545 million, industry sources familiar with the asset are telling therealreporter.com. As has already been occurring in the suburbs at great sums, Equity parent Blackstone has been eyeing sales of its massive urban portfolio that covers millions of square feet in the city alone and includes such premiere address as 100 High St. and 100
and 125 Summer St, all in downtown Boston.

“It is happening,” one source conveys of the inaugural step, putting the sale price at about $650 per sf, and noting that, “nothing that big has come along around here in a long time” in New England. “It’s huge,” says the source of what appears to be a final commitment signed on Thursday. The 40-story tower is 821,000 sf. and features an open three-story lobby that opens to Post Office Square Park.

One unanswered issue is whether a broker was involved in the transfer, with several maintaining it was a direct exchange. “It’s one partner selling to another,” was the view of one Hub investment sales specialist, who was nonetheless wowed by the fast-moving result and among those anticipating future moves on asset trades by the giant REIT. In its first official move, Morgan Stanley has retained Jones Lang LaSalle as leasing and property manager, a JLL official acknowledges to therealreporter.com. The assignment is a convenient one for the full-service real estate company, with its Boston operations headquartered in the structure.

Industry observers maintain one part of Equity’s exercise in reshaping its platform could be to engage similar partners and invite a response, as some say may have been the case at One PO Square. Others expressed disappointment that the Class A tower will not make an appearance on the sales block, claiming the process could have fomented a feeding frenzy, especially in an environment as charged as Boston is at present. The Financial District has suddenly emerged from a dark recession and cross-town competition from the Back Bay and Seaport Districts to regain its swagger that existed for decades before many tenants tired of a lack of amenities and after-hours activity. Vacancies skyrocketed after the 2008 recession, several landlords turned over their keys and rental rates fell below that of even the Seaport, at the start of the decade still regarded an outpost for office users.

Over the past 18 months, however, tenants and capital sources have caught wind of the downtown rebirth as some of its inherent strengths such as a centralized location and access to multiple transit lines plus rents in many cases still cheaper than other parts of the city. That situation could be evening out, with 914,000 sf of net absorption since mid-year 2012 driving the Financial District vacancy rate down to 12.0 percent for 35.4 million sf of supply, and along the way, downtown has restocked itself with a more diverse tenant base than found in the old era of accountants, attorneys and financiers to include new-age technology firms and firms including PayPal, which now occupies 65,000 sf sf at One International Pl., owned by the Chiofaro Co.

Efforts to contact the new ownership and Equity officials to discuss the changing of the guard at One PO Square were unsuccessful by press deadline.