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Mon, Oct 23
A Compendium of Property & Capital News
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Oct 23
A Compendium of Property & Capital News

NatDev Buying Prime Boston Industrial Site Via TCG for Near $12M

August 31, 2017 — By Joe Clements
Phot: Derek Szabo

BOSTON—Fresh off their transformational conversion of a gritty South End industrial site into the award-winning INK Block mixed-use complex, National Development is buying another non-descript warehouse 1.5 miles away pitched to bidders as a kindred repositioning opportunity, although there are inklings the victorious suitor has far less ambitious plans for this site, a 2.7-acre property that should approach $12 million in a trade expected to be finalized “any moment” by one account.

“Urban industrial is as hot as anything in Boston right now,” a CRE veteran familiar with 960 Massachusetts Ave. relays to Real Reporter in asserting “there is no reason to reinvent the wheel there.” Instead, the 76,000 sf in two 1950’s-era structures will supposedly undergo upgrades to compete for top-tier industrial and manufacturing tenants who are increasingly willing to shell out upwards of $25 per sf on a triple-net basis to fulfill e-commerce’s so-called “last mile of distribution” aim which is changing the landscape for industrial buildings across the land.

“This ongoing trend bodes especially well for urban-located industrial facilities such as 960 Mass Ave.,” TCG notes via an informational package showing the scant 782,000 sf of warehouse in Route 128 Central reflects a 61.1 percent plunge since 2001 (2.0 million sf), whereas the swath running from Boston and the inner suburbs up to Swampscott is off 57.6 percent, dropping from 10.6 million sf to 4.5 million sf. The impact extends to Interstate 495 where supply has fallen 28.6 percent from 43.0 million sf 16 years prior to 33.3 million sf at mid-year 2017.

For an owner considering a “higher-and-better” use strategy at the building, current zoning allows 240,000 sf of build out at 960 Massachusetts Ave., TCG tabulates in the Capital Markets presentation touting an opportunity which features a range of options from laboratory and back office space to hotels and retail. Calls to TCG Capital Markets leader Christopher Skeffington regarding the latest rumors were not returned by press deadline. Other members of the Capital Markets team orchestrating the agreement are Vice Presidents Roy Sandeman and Joseph Olin while leasing guidance was provided by Rob Byrne and principal Michael Joyce.

National Development also did not immediately respond to Real Reporter inquiries, but multiple sources concur a deal is near conclusion. “It is going to happen at any moment,” one industry professional insists, possibly pre- Labor Day. Despite unofficial estimates that would have 960 Massachusetts Ave. sell for almost $4.5 million per acre if the $12 million level is achieved, there is no pricing goals stated for the property which was offered free and clear of any debt, TCG’s client 960 Massachusetts Av LP having paid $1.2 million in September 1997. The Boston assessing office puts its value today at $2.7 million, which interestingly is down from a $3.2 million calculation made in the city’s prior assessment.

Several other Boston development properties have sold for substantially more than that, with the Boston Flower Exchange site less than a mile away famously acquired in 2016 at $8.1 million per acre, that purchase by Abbey Group first unveiled by Real Reporter. Another at 370-380 Harrison Ave. being converted to apartments yielded $7.7 million per acre and 1205-1207 Dorchester Ave. cost its buyer $4.8 million per acre.

While Newmarket has been dominated by industrial tenants for decades, and city officials reportedly remain committed to supporting those occupants, there is a popular shopping plaza in the South Bay Center being expanded to a mixed-use complex and a wave of construction arrived in the mid-2000s that brought more diverse uses until the 2008 recession put that progress on hold. TCG notes positive fundamentals such as strong transit access are more relevant today than ever thanks to millennial indifference towards the automobile, especially in a metropolis which claims a higher level (34.7 percent) of that constituency in the current workforce than any other city in the US.

Newmarket not only has an array of bus lines running through the district, TCG explains access to commuter rail a four-minute walk away and MBTA Red LIne service also close gives denizens a pair of options where South Station is only one and two stops away, respectively. The four-wheeling crowd can certainly get there, with Interstate 93 a two-minute drive, the Massachusetts Turnpike’s I-90 connection five minutes away and Logan International Airport within 10 minutes via the new Ted Williams Tunnel.

With all that in mind, observers indicate New England Development and partner Charles River Realty Investors may consider 960 Massachusetts Ave. a chance to land bank with benefits, i.e. enjoy healthy income from industrial tenants while the Newmarket District and South End evolutions continue to progress. Besides the 550,000-sf INK Block assemblage anchored by a Whole Foods Supermarket, TCG counts a baker’s dozen of approved projects along the Harrison Avenue Corridor, endeavors totaling 3.6 million sf of office, residential and retail product, 1.6 million sf of which is slated for the Flower Exchange site.

“It’s a great play . . . now for sure and most probably later,” a CRE professional remarks of the apparent patient approach by National Development whose principals include President Thomas M. Alperin and principal Theodore Tye plus CRRI President Brian H. Kavoogian and Bryan J. Clancy. Edward L. Marsteiner II is Director of Acquisitions.

The lack of input from parties involved makes details of the marketing process and acquisition plans difficult to assess, but one CRE professional maintains others also embraced 960 Massachusetts Ave. for its traditional industrial use, and claims the listing created “a feeding frenzy” among those recognizing the dearth of such product in city limits and the forces at work forcing tenants including Amazon itself to pay the necessary freight to secure a spot. The upside can be had quickly, TCG conveys, with the 11 tenants taking up 82 percent of the space at 960 Massachusetts Ave. on short-term pacts which can largely be terminated at year-end 2019.

Brian Kavoogian Edward Marsteiner Thomas Alperin Joseph Olin Christopher Skeffington