Colliers Listing 590,000-SF Beacon Hill Office Tower for MassDev

BOSTON — They are hardly the first to do so, but bringing yet another Beacon Hill office building to the sales block could prove especially profitable for MassDevelopment, the finance and development agency that helped revive and expand the once-tired state-owned structure at 100 Cambridge St. today split into government- occupied low-rise and first-class high-rise product housing a blend of academic, architectural, financial and legal tenants. Colliers International has been retained by MassDevelopment to offer the 22-story, 590,000-sf tower’s leasehold interest to a capital arena clamoring for large-scale, cash-flowing urban CRE difficult to come by, especially a 100-percent leased asset in Boston’s Government Center district where hundreds of millions of dollars of infrastructure and transporation modernization is underway.

Colliers Capital Markets principal Douglas Jacoby confirms the exclusive listing of what he terms MassDevelopment’s ‘crown jewel’ among its vast portfolio of projects spread across the Bay State, ventures aimed at stimulating local economies.

“We are ready to go,” Jacoby says of a team that includes Scott Dragos, Anthony Hayes and Michael McLaughlin. Leasing guidance is being provided by downtown experts including CEO Thomas J. Hynes Jr., Senior VP Kristin Blount and Vice President Lauren Vecchione. While Jacoby declined to provide pricing targets, he predicts “a lot of people will be looking at” 100 Cambridge St., basing his expectations on various attributes such as “spectacular views” and MassDevelopment having created “really cool space” possessing a LEED Silver sustainability ranking from the $200 million overhaul that took three years to complete, coming back on line in 2004. “It is a really unique and wonderful asset and we think it will be very wellreceived,” J

acoby says of the property. Vistas from “all sides” of 100 Cambridge St. on the upper floors is among the elements Jacoby gives in comparing the building to best-in-class neighbors such as One Beacon St. and putting its pedigree as a business address on par with Center Plaza, a nearby private building encompassing 717,000 sf that was bought this past December by Shorenstein Properties for $307 million.

The leasing roster at 100 Cambridge St. has such prized denizens as American Student Assistance, occupant of 151,000 sf on six floors, plus Cannon Design, a leading healthcare industry architect which is in 27,500 sf on floor 14. The Prince Lobel law practice is on the top two levels, and according to sources, appropriately pays the highest rents, said to be in the mid-$30’s per sf with an expiration in summer 2016. ASA’s lease runs to May 2019 and Massachusetts General Hospital has three suites expiring between next April and June 2016.

With the state piece factored in on 48 percent of the building, the tower’s average rent is in the $27 per sf range, whereas the privately leased space runs higher but is still pegged at 30 percent below market rates. Having redeveloped the building primarily to retain its own tenants including the Massachusetts Attorney General’s office, Department of Housing and Community Development and Division of Revenue, the government rent levels estimated at $21.50 per sf are a favorable deal for the Commonwealth, but Jacoby notes that it ensures a steady cash flow until 2052. Meanwhile, ground floor retail leased to the likes of Dunkin’ Donuts and Rite Aid combine with the private office space to provide the value creation going forward investors are craving. That was evidenced in one high-rise tenant who just renewed at a rate in the mid-$40’s per sf, a trend Jacoby says is expected to continue as other agreements roll.

“It is not very often that you get a first-class tower that has so much stability and core combined plus having such a great opportunity for upside,” he says. “And you just can’t beat the location.” There are six MBTA subway stations in the immediate area, for example, and diverse demand drivers from Massachusetts General Hospital to the plethora of local, state and federal agencies encompassing Government Center.

Altogether, Jacoby says he expects activity for 100 Cambridge St. will come from both domestic institutional funds and overseas capital sources who have scooped up billions of dollars in Boston office towers over the past 18 months. Although certain investors are precluded from pursuing a ground lease opportunity, Jacoby says he expects the strength of the asset fundamentals and being in Boston should keep that impediment at a minimum for the Colliers listing. While

100 Cambridge St. is the most substantial example, numerous Beacon Hill buildings have been offered up for sale during the current market run-up, often with the idea of parlaying returns into better space situations, that being the motivation for the Unitarian Universalist Association to cash out on its longtime headquarters next to the Massachusetts State House, with Boston Realty Advisors tendering that process involving four buildings that yielded $23 million. Also this summer, Suffolk University divested its 47,000-sf Felton Building for $15 million through JLL, and that same brokerage shop just advised the Massachusetts Teachers Association in harvesting its 35,000-sf headquarters at 20 Ashburton Pl. JLL’s Capital Markets team delivered nearly $10 million in its trade to a New York-based investment group whose ownership includes members of the Leventhal family, one of Boston’s best-known real estate clans. That deal was first reported by therealreporter.com on Oct. 7th