DivcoWest, Synergy Selling 350,000 SF in Hub to AIG for $175M Via HFF Exclusive

May 22, 2017 — By Joe Clements

55 Summer Street, Boston MA

BOSTON—Operating partner Synergy Investments is expected to remain in place but five mixed-use buildings in the fantastically revitalized Downtown Crossing district are getting AIG Global Real Estate as their new majority owner while DivcoWest steps aside for a price said to be reaching $175 million, which if it bears out will be a whopping $500 per sf to land a package branded collectively as The Hive. HFF Capital Markets is selling the 350,000-sf portfolio owned by DivcoWest and Synergy, holdings which encompass 38 Chauncy St. plus 55, 71, 77 and 87 Summer St.

“It is confirmed,” one CRE professional tells therealreporter.com when asked of the pending commitment, that acknowledgment bolstered by other sources, some of whom maintain an exchange could be recorded as early as today. “Imminent” is the way one describes the timing. Synergy and HFF Capital Markets team members did not respond to inquiries regarding the pending sale, but informational materials in circulation show an HFF contingent led by Senior Managing Director Coleman Benedict, Managing Director Chris Phaneuf and Directors Mark Campbell and Benjamin Sayles has indeed been peddling the buildings as a stabilized opportunity to investors, with the portfolio 95 percent committed to a diverse tenant roster numbering four dozen.

Whether AIG is financing its purchase is unclear but observers spoken to indicate Synergy will reprise its operating partner role under a newly formed entity. The firm led by David Greaney pre-dated DivcoWest on the 71-77 and 83-87 Summer St. holdings whereas the two firms united in 2014 to buy 38 Chauncy St. and 55 Summer St. The former acquired from Brickman is a 132,775-sf office structure bought for $39.5 million in July of that year and the latter was secured four months later when the 125,225-sf property fetched $48 million.

The five assets being sold are all mid-rise buildings of varying dates, with 83-87 Summer St. hearkening back to the 1870s and 55 Summer St. coming on line a century later. Both 38 Chauncy St. and 55 Summer St. were bought by DivcoWest from Gotham-based Brickman Associates. The Summer Street asset features a large CVS on the ground level and office space above on four levels. The conjoined 71 and 77 Summer St. buildings which total 62,250 sf were in a four-building portfolio Synergy and GreenOak Real Estate spent $23.5 million on in July 2012 before harvesting the other two separately for $19.5 million. DivcoWest bought out GreenOak at 71-77 Summer St. for $20.7 million in late June 2014 and paid $10.2 million the same day to nail 83-87 Summer St.

DivcoWest already knew a thing or two about the neighborhood even prior to Downtown Crossing’s incredible mid-decade surge, with the San Francisco-based group led by Stuart Shiff presciently scooping up One Winthrop Square in December 2013 before anyone could notice, then the boutique office building was harvested for $55 million in October 2015. Frequent DivcoWest competitor/collaborator Synergy was a pioneering buyer whose restoration of 101 Summer St. is credited with righting the ship along that key arterial along which tens of thousands of people traverse daily between Boston Common and South Station or over to the emerging Seaport District a five minute walk away.

GreenOak and Synergy spent $5.5 million in July 2012 for 83-87 Summer St. The five-story building totaling 28,125 sf is 91.1 percent occupied and has the biggest percentage of retail in its constitution, a figure of 38.4 percent versus 33.3 percent at the smallest of the five, 71 Summer St., where 33.3 percent of the 15,950 sf is ground-floor retail. Eight street-level stores provide over 20 percent of the portfolio’s cash flow, denizens including Bank of America, Drybar, Sweetgreen and Wendy’s. Their average in-place lease term is 5.3 years.

There are 40 office tenants, with The Hive branding campaign created by Synergy as a leasing tool marketing the upper levels as “creative office space” which so-called TAMI tenants are big consumers of in Boston and Cambridge. Among the recent arrivals from that realm is cyber security firm Threat Stack Inc., which in November leased 13,775 sf at 55 Summer St. on the second floor. “It is very cool space,” relays one informed downtown professional.

Even so, one point noted in the marketing materials is that while 27 percent of the space occupied are tenants from so-called TAMI professions, they are followed close behind by old-school Financial Services groups at 24 percent. “It is a nice blend,” the downtown expert says in opining the diversity and number of tenants provide AIG the stability it was said to be targeting in making a winning entry into the Downtown Crossing submarket. “It’s good for everybody,” that source added when asked of the DivcoWest outcome, and that would include the new steward. The observer claims Downtown Crossing’s redux “is just beginning,” with street retail “a big differentiator” for winning trendy office tenants, while having Synergy apparently staying put to run the show is deemed “a huge plus” for the buyer.