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Sat, Oct 19
A Compendium of Property & Capital News
Oct 19
A Compendium of Property & Capital News

Normandy to Buy Somerville Asset from DLJ Via C&W; Deal Could Hit $24M

October 16, 2017 — By Joe Clements
35 Medford St.; Somerville MA

SOMERVILLE—Dating to 1870 and situated off McGrath Highway behind a strip retail center, 35 Medford St. might seem an unlikely candidate to foment much in the way of global intrigue, but the non-descript Class B office building proved a popular asset for investors both near and far when DLJ Real Estate put it up for sale this summer through Cushman & Wakefield, and now Normandy Real Estate has prevailed as winning bidder for the 55,400-sf property, CRE watchers are telling Real Reporter. Pricing is being put within striking distance of $24 million—over $430 per sf if that figure is achieved.

C&W Managing Director Steffan A. Panzone declined to identify any of the bidders or discuss financial details when queried of the Normandy buzz, but he does confirm an investor has been identified for an asset so popular some three dozen tours were conducted by the C&W Capital Markets team which is led by Vice Chair Peter Joseph, Panzone and Managing Director Brian Barnett. According to Panzone, “35 Medford Street appealed to a broad audience of domestic and international capital drawn to the property’s immediate upside opportunities and long-term value appreciation given the strength of neighboring Cambridge and the transformational public and private investment in Somerville.”

A luxury apartment high-rise recently opened around the corner, and 35 Medford St. is close to a bevy of dining, hotel and retail venues, including the Twin City Plaza and a Super Target. Those LWP aspects were touted in C&W’s promotional materials, but what sits within walking distance across the border is said to have stirred even more action from bidders, that being the “super-cluster” of life sciences firms, pharmaceutical giants and leading technology groups assembled in Kendall Square where rents are double the rates being sought in Somerville.

The asset itself has been repositioned by DLJ to attract image-conscious firms thanks to a $2.7 million infusion over the past 24 months that created “really cool brick-and-beam space,” C&W outlines, combined with the acumen of C&W broker Scott Gredler, leasing agent at the property for several years. “Scott has done an excellent job bringing tenants to a really great property that we had anticipated would attract many people when it came available,” Panzone says, adding, “tenants and investors really favor the brick-and-beam product these days—that was a big plus, too.”

C&W is quite familiar with Normandy, their crew fresh off the $45 million sale of that New Jersey based investor’s Marlborough Technology Park last month to KS Partners, the 585,000-sf MetroWest office complex an exclusive whose exchange is detailed in the latest Real Reporter. Possessing a lengthy history of regional development and investing, Normandy is known for its value-add endeavors, and C&W relays that “a secular shift” of the Somerville community and record rents in Kendall Square promise “significant upside” for 35 Medford St. as leases maturing over the next three years are 30.1 percent below the going rate for Boston’s Inner Suburbs.

The delta is even wider compared to Kendall Square where the average asking rent is now $71.58 per sf versus the $41.14 per sf average C&W calculates for the Inner Suburbs which has enjoyed robust leasing of 147,500 sf YTD to put the vacancy rate for 6.5 million sf at 12.1 percent. Kendall Square tenants face rapidly escalating rents and dwindling inventory where the 7.0 million sf has a razor-thin vacancy of 3.1 percent.

Panzone did not offer a timetable for when a conclusion to the 35 Medford St. sales assignment might occur, but sources indicate a hard deposit has been made on the three-story structure which DLJ acquired in June 2016 for $12.4 million. It was the building’s second trade this decade, having fetched $4.2 million in December 2012 after being in control of the same family since 1965.

DLJ also has a track record of investing in metropolitan Boston, with current holdings including the 18 Tremont St. office building near Government Center in Boston and a condominium project at 25 Beacon St. In Somerville, the investor has an ambitious plan in place for a vast-mixed use development featuring commercial, residential and retail space.

C&W Capital Markets, meanwhile, has multiple listings still in play even after a number of completed transactions during 2017, including the aforementioned Marlborough Technology Park and two Woburn office buildings at the MetroNorth Corporate Center that yielded $47.1 million this summer for clients Angelo, Gordon & Co. and National Development. Other activity includes 91 Hartwell Ave. in Lexington, a laboratory/office investment, and 825 University Ave. in Norwood. Hilco is the client there who bought the 166,575-sf flex/office building in May 2016 at a consideration of $26 million. Rolled out by C&W in the early summer as well, observers anticipate a trade there in the low- to middle-$30 million sphere.

Steffan Panzone Brian Barnett Peter Joseph Scott Gredler