John Hancock Towers Staying Local, Going to Boston Properties

BOSTON—After confirming its commitment to purchase Waltham’s Bay Colony Corporate Center for $185 million, Boston Properties has edged out Vornado Realty Trust in a bidding war for the John Hancock Tower, industry sources are telling therealreporter.com. In an exercise said to be approaching $925 million, the 62-story Back Bay office tower is being harvested by a joint venture of Five Mile Capital and Normandy Real Estate Partners through Cushman & Wakefield’s Capital Markets Group.

“We are hearing it is Boston Properties . . . Everybody else is out,” says one industry source, among multiple market professionals tracking the negotiations who are pegging Boston Properties as first in line to buy the tower, whereas a source close to the talks claims an agreement could be unveiled within the next week.

Calls to C&W were not returned by press deadline, and Boston Properties spokeswoman Arista Joyner declined to discuss the Hancock situation, relaying that “we don’t comment on rumors or market speculation.” The REIT is headquartered mere blocks away at its expansive Prudential Center complex. Vornado is a New York City based REIT whose leadership is in a contentious battle with Boston Mayor Thomas Menino over a stalled project in the Hub’s Downtown Crossing district.

Boston Properties and Vornado were first identified by The Real Reporter in an August article as being among nearly a dozen entities vying for the Hancock Tower and several adjacent properties, a package totaling 1.7 million sf. The competition was later winnowed to five finalists that included Beacon Capital Partners, another Boston real estate titan that had sold the property in 2006. Vornado’s intent to buy the iconic Back Bay structure sparked criticism from Menino and the city is now separately threatening to revoke permits for the Downtown Crossing project in hopes of forcing its sale to another developer.

C&W’s marketing of the Hancock Tower comes amidst an intriguing stretch for the landmark asset, one that is about to change hands for the third time in less than two years, initially via a foreclosure by Broadway Real Estate Partners, whose $1.3 billion acquisition from Beacon Capital Partners in late 2006 was bloated by debt that could not be supported in the market crash. Five Mile Capital and Normandy then positioned themselves to take over the complex in March 2009 at an auction, paying an estimated $660 million.

According to sources, Boston Properties would be acquiring the Hancock Tower on its own, even though Five Mile Capital and Normandy had supposedly been angling to retain a minority position in the property, which has seen occupancy increase to 86 percent under that partnership’s stewardship. The activity includes a major 15-year lease struck earlier this year with Bain Capital for 210,000 sf. ‘They’ve done a superb job,” one observer says of the current landlords. That source also predicts Boston Properties and the Hancock owners will cement their deal near-term, especially with Vornado hovering in the wings. “That helps,” the investment sales specialist maintains of having a second option to motivate the top bidder.

Boston Properties did confirm via a press release issued on Monday that the REIT is buying the Bay Colony Corporate Center from Prudential Financial. That four-building, 980,000-sf asset was also taken back by the lender and faces an arduous repositioning, but nonetheless fetched an impressive result and praise from its new ownership as “one of the most prestigious addresses in suburban Boston.” Joyner declined additional comment beyond that stated in the Boston Properties press release, and calls to Eastdil Secured to discuss that firm’s marketing of the Bay Colony property on behalf of seller Wells Fargo were not returned by press deadline.