Grossman Cos. Finalizes 1031 via Dedham Portfolio Buy Backed by Cambridge Savings BankJune 08, 2021 — By Joe Clements
DEDHAM — An 80,000-sf hodgepodge of Route One CRE bought for $11.4 million to conclude a 1031 like-kind exchange hardly looks like the kind of product Grossman Cos. divested on the front end, two low-rise logistics facilities approaching Logan International Airport held by the multi-generational firm for over a half-century, and Co-President Jacob M. Grossman says the changing formula is not happenstance, explaining their new line-up reflects “a transformational” shake-up “focused on the future.”
“We are planting the seeds for the next 40 or 50 years in (acquiring) a diverse array of new investments that give us current cash flow or long-range development potential, and possibly both if we get lucky,” relays Grossman, who notes the latest amalgam fortuitously has both qualities and possesses “a fantastic location” whose retail pylon elbows for eyeballs with signage at the gateway of Legacy Place, the vast lifestyle center lining Route One where horns lock at Interstate 95/Route 128. “We absolutely feel fortunate buying into this neighborhood,” he says. “It is among the best intersections in the state . . . and we are next to one of the most prominent retail destinations in New England.” Throw in a parcel spanning five acres in the thickly settled Route One corridor, and Grossman says the investment is brimming with upside “down the road” while the steward benefits from in-place rents and planned improvements to increase the value of available space such as 15,000 sf of industrial in 25 McNeil Way.
Along with a $2.55 million Cambridge Savings Bank loan, the Dedham portfolio was financed using $9.1 million from mid-May’s harvesting of 230 and 240 William F. McClellan Hwy. Grossman Cos. completed the 1031 exchange buying a 30,000-sf office building at 75 McNeil Way and 40,000 sf comprising the aforementioned 25 McNeil Way whose current uses are as showroom space and warehouse. Stand-alone retail at 850 and 860 Providence Highway—Route One—is occupied by a 7,000-sf Hooters Restaurant and 3,500-sf AT&T phone store.
“The property offers us a chance to make immediate improvements to the existing assets with potential for development over the long-term,” outlines Grossman, who shares leadership duties at the Quincy based operation with Co-President David B. Grossman and Chairman Louis J. Grossman. The firm’s footprint on McClellan Highway extends back to the 1960s and has already resulted in a prominent warehouse at 150 McClellan Highway being restored to a first-class self-storage facility that brought $23.1 million in autumn 2014.
The Dedham acquisition is multi-tiered, its conclusion representing the fourth 1031 exchange exercise involving a larger expanse of air-freight buildings along McClellan Highway (Route 1A) Grossman Cos. master-leased to Cargo Ventures in 2018 with intentions to sell the holdings outright as the firm found suitable replacements. Their final trade puts the tally at $34.8 million total.
The program commenced in April 2020 when 290 William F. McClellan Hwy. fetched $10.5 million, followed by the late October trade of 370 William F. McClellan Hwy. for $8.25 million and the $6.9 million dispatch of 310 McClellan Hwy. in mid-December. Proceeds from those initial sales enabled Grossman Cos. to pile up holdings stretching from Boston’s North Shore to West Hartford, CT, with assets accrued ranging from a pair of retail buildings net-leased to Santander Bank, an interest in two apartment buildings on the Medford/Somerville line involving 76 units, and fulfillment of a desire to buy the other half of a block of retail and industrial to go along with the half it has held for decades fronting Commonwealth Avenue in Allston that spills over into tony Brookline, a low-slung structure across from Boston University’s west campus.
The Allston/Brookline investment, previously detailed by Real Reporter along with the other two McClellan Highway swaps as they occurred, gives Grossman Cos. a 1.75-acre parcel that the firm sees as a promising vertical development site over time, a vision Jacob Grossman says is similar to the Dedham acquisition.
“We think the long-range development prospects (in Dedham) are very promising,” he says. “It is very rare to find a site that large anywhere over there.” The deal was orchestrated as an off-market negotiations involving another established family owned CRE investor, McNeil Associates. The McNeil clan had held the portfolio back to the 1980s, having acquired each asset over time.
While there was no broker involved in the Dedham sales transaction, veteran advisor Austin Smith, SIOR, from 128 CRE has been tabbed to find takers for about 15,000 sf available at 25 McNeil Way, the 1960’s-era showroom/warehouse building which can be subdivided to units under 1,000 sf. The office building at 75 McNeil Way has denizens occupying space under tenant-at-will agreements, and Jacob Grossman says his firm is evaluating what its plans are for that structure which dates to 1971.
Seasoned estate attorney Mark W. Williamson handled matters as trustee for the sellers of the Dedham assets while Grossman Cos. engaged legal counsel for its side including Hinckley & Snyder partner John R. Pariseault who reviewed leases at the property. The Seyfarth Shaw tandem of partner Michael F. Dowley and Alexander B. Roitman took on active roles in all of the McClellan Highway legal maneuvers, undertakings Jacob Grossman agrees were “pretty complicated” on top of being chock full of 1031 regulations whose non-compliance can lead to onerous results. Seyfarth Shaw handled the multiple transactions “soup to nuts,” says Jacob Grossman. “It took a lot of legal hours,” he recounts, but maintains the CRE choreography helped the firm weave through its year-long process minus any of the dire consequences that can occur such as scrambling to find a replacement property in a disadvantaged position.
“We feel good” about completing the 1031 quad-athalon, he says while also extending kudos to the financial expertise provided by Brookline Bank 1031 exchange specialist Thomas St. Jean overseeing the multiple exchanges, as well as the lenders who stepped up such as Cambridge Savings Bank commercial loan officers Laura Miller and Kevin Teller who structured the loan for the Dedham deals when “a sliver of debt” was needed on top of the McClellan Highway contribution. Grossman Cos. enjoys “a long-standing relationship” with CSB, Jacob Grossman relays, with Miller and Teller a year ago helping to fund the firm’s purchase of an industrial property in Connecticut, that deal also detailed by Real Reporter unrelated to the McClellan Highway sales.
Located on nearly seven acres, the four McClellan Highway properties comprise about 72,000 sf, putting the square-footage price into the $484 range. The Dedham buildings went for approximately $141 per sf, although observers note the medley of product types makes it challenging to tabulate that figure in a meaningful way without closer analysis. The capitalization rate for the sale is estimated in the low 6 percent range.Louis J. Grossman Jacob M. Grossman David B. Grossman 75 McNeil Way, Dedham MA Michael F. Dowley Kevin Teller Laura Miller Thomas St. Jean Austin Smith