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C&W Listing Two Metro Boston Office Assets; Middle-Market Deals Could Reap $50M+

July 13, 2017 — By Joe Clements

NORWOOD—Middle market CRE investors confronting a summertime dearth of opportunities can find some measure of relief from two separate exclusives introduced through Cushman & Wakefield, listings which will deliver over $50 million total should industry estimates bear out. Owned by Hilco Global, the larger and newer of the pair was launched this week, according to market sources who peg 825 University Ave. in Norwood as an asset likely to stir buyers seeking fully leased product in an established yet emerging suburban venue.

C&W’s Norwood campaign follows closely on this June’s introduction of 35 Medford St. in Somerville, with C&W representing owner DLJ Real Estate on harvesting that refurbished 55,400-sf structure which dates to 1870. Members of the C&W team did not respond to inquiries regarding the assignments as of therealreporter.com press deadline, but marketing materials are in circulation touting each listing, endeavors which continue an eventful 2017 for the Capital Markets contingent which is led by Vice Chairman Peter Joseph and Managing Directors Brian Barnett and Steffan Panzone.

Comprised of office space plus an R&D component for a footprint of 166,575 sf on three levels, 825 University Ave. houses two investment grade tenants on extended commitments which combine to a weighted average of eight years left on the terms, ingredients one CRE professional familiar with the building says adds up to it being “a stabilized investment-grade credit opportunity” attractive enough that observer and others portend could result in pricing from the low $30 millions to approaching a mid-$30 million sphere. Hilco paid an even $26 million in May 2016 to secure the asset.

“It should do well,” offers the veteran spoken to who has experience in the submarket and knows 825 University Ave. Constructed in 2006, the building is two-thirds occupied by an affiliate of Ilinois Tookworks, serving as the entity’s regional headquarters. That group, known as Instron, just renewed for 10 additional years, whereas the remaining space is used as another headquarters operation, this one for Xcerra, a firm active in the electronics and semiconductor industries.

Another reason brisk competition is anticipated for 825 University Ave. is the cost of entry which would be a range that might have certain institutional funds interested while still being something an established private regional investor could take down. Also, “the location is tough to beat,” says the source, not only in its proximity to Routes One and 128 plus Interstate 95, but also because 825 University Ave. is sandwiched between two of New England’s most successful mixed-use projects, the Legacy Place lifestyle center in Dedham and University Station in Norwood.

The Norwood exclusive comes on the heels of C&W being named agent for 35 Medford St., an enduring brick-and-beam building that can accommodate both office and laboratory users. That transit-oriented property has as its chief tenant a fast-growing 3D Printer startup. Called “really cool brick-and-beam space” in one account, 35 Medford St. gets even more attractive when one assesses its close proximity to Cambridge’s Kendall Square where office rents are averaging $65-per-sf triple net whereas the Somerville average is trending in the $30 per sf level. That should be good news as companies get pushed out of the core East Cambridge district and begin looking for nearby options, according to expert analysis and actual migration patterns seen over the past 24 months.

Given that, those queried on the DLJ offering maintain 35 Medford St. will trade into the low $20 million range versus the $12.6 million its Gotham-based landlord spent in June 2016. “This is a very strong mark-to-market opportunity that will get people excited,” predicts one CRE watcher commenting on the matter, especially in light of a new-found ardor for older Class B commercial buildings with metro Boston rents up 27.6 percent for such inventory while vacancy has plunged to just 6.8 percent.

Intriguingly driven by small- to mid-sized “new economy” tenants, such firms may appreciate the ambiance but will likely be less sentimental should the air conditioning falter or wiring flicker, shortcomings found in older buildings often requiring owners to address such troubles in order to win a leasing requirement. In the case of 35 Medford St., C&W points out in a marketing missive that DLJ has already done that work up front, infusing $2.7 million as part of a complete fast-track renovation where physical upgrades and popular amenities were instituted.

Creative and technology oriented firms have responded, driving occupancy above 95 percent since the work was completed, and poising 35 Medford St. for the coming decade. C&W reports that Cambridge/Somerville companies whose leases are maturing over the next 36 months are 30.1 percent below market on their in-place rents.

Stephan Panzones Brian Barnet Peter Joseph