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A Compendium of Property & Capital News
Jul 22
A Compendium of Property & Capital News

LPC JV with Foreign Capital Buys Central Sq. Mixed-Use Asset for $75M Via CBRE

August 29, 2017 — By Joe Clements

CAMBRIDGE—In yet another blockbuster commercial property exchange in Central Square—the third major trade here this summer—Lincoln Property Co. has teamed with a familiar capital source hailing from South America to buy 625 Massachusetts Ave. from L&B Realty Advisors, a Texas-based investor which reaps $75 million for the 120,000-sf mixed-use building listed exclusively for sale through CBRE/New England’s Capital Markets team. LPC’s purchase was backed by $45.7 million from USAA Life Insurance Co., the debt component actually more than the $40.0 million L&B spent on the asset in May 2012.

At this point, parties involved in the negotiations are remaining mum, with CBRE/NE Capital Markets principals not responding to inquiries as of press deadline. Members of the CBRE/NE team include partners David J. Pergola and Brian R. Doherty overseeing a group that includes First VP Bruce Lusa and Client Services Coordinator Sara Forino.

Middlesex Registry of Deeds has already posted the transaction involving two conjoined structures at 613-627 and 631-641 Massachusetts Ave. The opportunity for 625 Massachusetts Ave. has been in circulation throughout this summer with informational materials touting a deep roster of credit retail and office tenants, a constituency whose cachet was ramped up considerably when WeWork opened its first Cambridge location this summer, that 15-year commitment enhancing intensity towards the asset, according to observers familiar with that pact. An existing tenant which just renewed did not hurt the ardor, either, i.e. Harvard University, which uses its space as spillover for functions not necessary to be at nearby Harvard Yard.

“That was a game-changer, no doubt,” says one CRE professional of the WeWork lease, although the source asserts 625 Massachusetts Ave. would have fared well in any event. As a Real Reporter article yesterday outlined regarding Monday’s $30.1 million buy of 515 Massachusetts Ave. by billionaire CRE investor Dr. Gerald Chan, that deal brokered by Newmark, Central Square has become a new darling among capital from around the corner and around the globe as a logical infill venue for development spilling out from Kendall and Harvard Squares, the two hotbeds in between which it is sandwiched. A 19-story mixed-use building with 285 apartments is one reminder of that demand, a broker spoken to regarding 515 Massachusetts Ave. had noted in that story.

Besides the office space on its second and third levels, 625 Massachusetts boasts a retail lineup that also apparently steeled its value in the eyes of investors, the stores featuring a Boston Sports Club, TD Bank and Walgreens. The property is also supremely located right at the Central Square MBTA Red Line station from which tens of thousands of commuters stream from on a daily basis. “That was big for WeWork—it really fits their geography,” one industry professional active in Cambridge explains of the company which provides economical job-sharing space for firms and individuals.

New zoning that could allow low- and mid-rise properties in Central Square to be expanded is also cited as a favorable evolution for investors. Whether there are plans for any additions at 625 Massachusetts Ave. is uncertain, although one potential roadblock would seem to be the in-place leases, including the WeWork agreement filling upwards of 40,000 sf on the second and third floors, a deal running to 2032.

“Stability . . . and cash flow” were offered up by one expert as to what suitors were chasing at 625 Massachusetts Ave., as well as the dynamic transformation credited for getting Dr. Chan to apparently buy 515 Massachusetts Ave. approximately 18 months after another entity of his acquired the abutting 505 Massachusetts Ave. Both are low-rise buildings which might benefit from greater FAR allowances, Real Reporter quoted observers in the Monday story on that deal.

Whatever the future holds for 625 Massachusetts Ave., the current activity comes at a time when other parts of metropolitan Boston have seen CRE sales ease, a situation many insist is temporary, with the autumn season expected to see increased listings in circulation. As to Central Square, just prior to 515 Massachusetts Ave. and now 625 Massachusetts Ave., DivcoWest spent $66 million on 955 Massachusetts Ave., the eight-story, 86,000-sf mid-rise bought from Brickman through JLL Capital Markets in which its debt and structured finance team arranged $46.1 million from Eastern Bank and Rockland Trust Co.

The mid-Cambridge building at 955 Massachusetts Ave. is closer to Harvard Square, an area CBRE/NE has also trolled recently, having helped broker January’s trade of 1100 Massachusetts Ave., an office/retail building secured for $36.7 million by Bentall Kennedy from longtime owner Thomas H. Dupree, the same seller the Capital Markets group previously delivered $46.7 million harvesting 1030 Massachusetts Ave. to another investor.

The Pergola/Doherty team has hardly been restricted to that Cambridge submarket, with the latest sale coming on the heels of office buildings divested at 125 and 150 CambridgePark Dr. in west Cambridge to Morgan Stanley and Longfellow Real Estate Partners last month on behalf of CBRE Global Investors. That was a $210 million consideration.

Lincoln Property Co. and its joint venture partner who now own 625 Massachusetts Ave. have participated in previous metropolitan Boston endeavors, including the purchase of 40 Court St. in Boston’s Financial District, a deal that closed in May 2014 for $31 million. Although no official confirmation has been forthcoming, the capital is reportedly from Chile involving private investors.

Brian R. Doherty Sara Forino Bruce Lusa David J. Pergola