Goldman Sachs to Buy Major Stake in 10 Milk St.

BOSTON—Goldman Sachs is about to become the latest national real estate entity connecting with Synergy Investments in ownership of a Boston real estate asset, according to market sources maintaining the financial giant is buying a majority stake in 10 Milk St., a venerable Beaux Arts office building linking Downtown Crossing and the Financial District, both among the Northeast’s most dynamic business enclaves. Newmark is exclusive listing agent for the 230,000-sf building that has a mix of office and retail space and was acquired two years ago January by homegrown Synergy and its New York-based partner, GreenOak Real Estate, which is cashing out its share of the asset. The two have had a close relationship, with 10 Milk St. the eighth property they have acquired together. Synergy is expected to retain a position as operating partner with Goldman.

Details of the pact remain sketchy, including the pricing allocation and percentage of the building that Goldman will control. Members of the Newmark Capital Markets team led by Robert E. Griffin Jr. did not respond to inquiries as of press deadline, and Synergy Investments officials were also unavailable to discuss the matter. Nonetheless, multiple CRE professionals tracking the process insist Goldman Sachs has emerged as winning bidder for the asset. One observer claims the deal could be finalized as early as this week.

One thing seems certain in talking to industry professionals familiar with the property—the price tag is expected to be far above the $58 million Synergy and GreenOak spent on 10 Milk St. barely two years ago in Jan. 2014, buying the under water CMBS loan on the asset, the initiative so complicated it took nearly a year to structure and the advanced debt acumen of Synergy founder David Greaney, a former PricewaterhouseCoopers accountant said to have a superior understanding of that realm. Since launching the firm in 2003, Greaney has methodically created an urban portfolio focused on downtown Boston that began with smaller Class B properties before ramping up its profile by acquiring larger assets such as 10 Milk St., Two Oliver St. and Ten Post Office Square. More recently, the firm has become a seller of its earlier holdings, a campaign that recently rolled 10 Milk St. onto the trading floor via the Newmark team that is also led by Vice-Chairman Edward C. Maher Jr. and Executive Managing Director Matthew E. Pullen.

The 10 Milk St. property dates to 1903, having been designed by famous architect A.H. Bowditch. There is another entrance at 294 Washington St. to the structure, an 11-story property which features cornices, stately columns and other ornate elements akin to the “jewel box” buildings prevalent in Boston which the Griffin team has become a specialist at trading for clients.

Both Boston’s office and retail sectors are enjoying a healthy stretch of activity, with the Financial District in 2015 posting positive net absorption of 488,000 sf to bring the vacancy rate into single digits at 9.3 percent for 36.1 million sf surveyed by Transwestern RBJ. Office rents have improved as well, with the survey estimating the average asking rate grew by 5.2 percent last year to a current level of $52.07 per sf.

Although pricing is undetermined for Goldman’s stake, a press release issued by Greaney upon buying 10 Milk St. indicated the cost of $252 per sf required to take control of the asset measured “favorably” with similar buildings reaping $350 per sf, or in the case of 10 Milk St., a figure that would equate to roughly $80 million. And that estimate was provided two years ago, with such properties continuing to increase in value. “It’s going to be a big number,” opined one industry expert who would not hazard a guess on what the outcome might equate to beyond calling $350 per sf “a reasonable expectation” from a minimal perspective.

This past spring, a 38,500-sf office and retail amalgamation at One Milk St. fetched $20.8 million when acquired by Midwood Investment of New York City in a transaction brokered by JLL. That equates to an astounding $540 per sf.