Jumbo Capital Seen Buying 50 Congress St. from KBS Advisors through HFFApril 20, 2017 - By Joe Clements
BOSTON—One of the usual suspects active in CRE investment circles on the suburban front has turned up in an unusual location if a rumored purchase by Jumbo Capital of 50 Congress St. in the Hub’s Financial District bears out. Multiple sources claim the firm has committed to pay KBS Capital Advisors upwards of $80 million for the venerable 180,000-sf office building which is perched mere steps from the CBD epicenter at Congress and State Streets and was put up for sale last September through HFF Capital Markets.
“That is huge for them,” a market watcher tracking the negotiations says in maintaining Quincy-based Jumbo Capital has already tied up the property and is moving towards a closing anticipated later this spring, which if true would enable KBS to harvest the asset within four years of its $51 million buy completed in July 2013 from longtime stewards Nordblom Co. The HFF campaign for California-based KBS that is being handled by Senior Managing Director Coleman Benedict and Director Benjamin Sayles was first unveiled by Real Reporter last September.
HFF team members did not respond to inquiries for the prior article or by press deadline of the newest report, while Jumbo Capital principals were also not immediately available. Founded in 2009 by Howard Hirsh and his cousin, Managing Partner Jay O. Hirsh, the firm has since assembled a footprint-bearing limited wanderlust in being concentrated in eastern Massachusetts. With assets stretching from Andover to Sharon in a fiefdom that has seen over $200 million in additions the past three years, about the only regional market Jumbo Capital had not explored heretofore was inside Boston city limits, but that gap could soon be filled.
“This is going to put them on the map in Boston right away,” predicts one of several industry professionals familiar with the 50 Congress St. result that followed an extensive process run through the autumn and winter months. Value-add was an element touted in promotional materials for 50 Congress St., with its legion of tenants possessing an average expiration date of just 2.5 years. That ostensibly promises a near-term, manageable rollover that enjoys cash flow while individual leases are negotiated in a climate where rents have been escalating for several years, putting many deals at 50 Congress St. below current rates.
That plus the mid-rise’s location at a 20,000 sf site on the edge of Post Office Square and physical attributes including efficient floor plates of 18,800 sf and two separate entrances reportedly combined to attract a bevy of prospects, their ardor mandating a price commensurate with the demand, and if it bears out, the $80 million figure would equate to roughly $445 per sf.
Albeit an aggressive figure compared to historical standards, by more recent metrics it would actually seem a relative bargain compared to what other similar product has been yielding, and many of those buildings secured at square footage prices running into the $500-per-sf sphere and beyond had substantial vacancy, unlike 50 Congress St., which has averaged over 95 percent occupancy during the past 20 years. That stability is rare given the rollercoaster ride Boston’s Class B office market has endured in that period, including a sharp slump after the 2008 recession that has been reversed dramatically and has seen rental growth accelerate faster than first-class space.
“It is remarkable” what has occurred in that sector, agrees a veteran downtown broker among those pegging Jumbo Capital as the winning suitor. Apprised of the supposed going-in basis, that source who is familiar with the building deems it “a pretty reasonable price,” one reason cited being a stark preference among many new-age tenants who are embracing the downtown yet want to be in older, character-ensconced structures such as 50 Congress St., which dates to 1902.
One indication of that trend can be found in the latest Financial District survey by Newmark that puts the overall vacancy rate at 8.5 percent, but for Class B inventory, the figure is down to a record 6.8 percent, and Newmark research shows it has been in single digits since late 2013.
Sources could not say whether Jumbo Capital has lined up financing for 50 Congress St. or if there is a joint venture partner in the mix, an approach the firm has used in the past to secure assets.