Rockpoint Via Newmark Juggling $450M+ in Hub Office TradesApril 25, 2017 - By Joe Clements
BOSTON—Rockpoint Group is doing what two prior owners of Tower Point have done this decade—they are selling the first-class Seaport District office building—and the homegrown private equity firm is apparently mimicking those predecessors by harvesting 27-43 Wormwood St. (pictured) far above the entry price, in their case $62.1 million dispatched in autumn 2015. In a Newmark-listed transaction, Gotham-based Northwood Investors will pay Rockpoint upwards of $88 million for the six-story, 155,700-sf asset, sources are telling therealreporter.com.
The sales process there is winding down just as Rockpoint prepares to separately finalize its nine-figure purchase of 100 High St. in downtown Boston, that deal another Newmark exclusive advising CBRE Global Investors on an exchange which could conclude by week’s end involving a 546,300-sf office tower whose Rockpoint commitment estimated at $365 million was first unveiled by Real Reporter in January. On both assignments, the Newmark team was unavailable for comment as of press deadline, its Capital Markets team led by Robert E. Griffin Jr., Edward C. Maher Jr. and Matthew E. Pullen.
As to the emerging Seaport District agreement, one CRE professional relays that “people really want in on the Seaport” while deciphering Tower Point’s unfettered value spurt driven by institutional capital clamoring for a building that stumbled into the new millennium a neglected back-office relic dating to 1900 largely let to government agencies and non-profits and so uninspiring that some had it earmarked for demolition.
A mid-2000’s effort to reposition the one-time factory faltered when the 2008 national recession arrived and remained in limbo until Tower Point was secured in October 2008 for $32 million by Meritage Properties. Founder Andrew Nathan energized and reshaped the restoration program just as the district’s remarkable rebirth was beginning, then made the first of the Tower Point windfalls when TDC came along in October 2013 to pay $43.4 million. That proved the turning point once TDC went full bore on the upgrades by incorporating modern finishes and materials and innovative design changes while overhauling the cafeteria and fitness center and installing a 7,500-sf outdoor courtyard.
Tenants responded to the initiative as evidenced in occupancy increasing from 74 percent to 95 percent by the time Rockpoint entered the picture, with that firm since taking steps to complete the TDC vision and apparently enhance its worth even greater. The element of gilt-by-association is also deemed a key contributor to Tower Point’s fortunes, market watchers maintain, and the A Street corridor along which the property sits has undergone unfathomable gentrification since the recession ebbed, the centerpiece of upscale office and residential and retail coming to the landscape being the jazzy new GE headquarters, its location almost directly across from the 1.1-acre Wormwood Street parcel.
According to the latest Newmark office sector survey, the Seaport has a first-class asking rent of $66.26 per sf, representing a 16.2 percent gain over Q1 of last year. That trails only Kendall Square in Cambridge ($78.41 per sf) and the Back Bay ($66.70 per sf) on that metric across New England and the vacancy rate is also among the tightest at 8.7 percent for 9.9 million sf tracked by Newmark Research Manager Jonathan Sullivan. That is down from almost 20 percent posted in Q1 2012 while new construction offering potential tenant relief is at barely 775,000 sf, 400,000 sf of that at Skanska’s 17-story tower underway at 121 Seaport Blvd.
Northwood Investors has previously appeared in Real Reporter involving its autumn 2015 purchase of 230 Congress St. in downtown Boston for $77 million, that Art Deco structure a 155,000-sf building dating to 1936. CRE professionals spoken to could not say whether the firm intends to finance its Seaport acquisition. The company that has a national and global investment platform also has holdings in Waltham, including its partnership with Anchor Line to transform a former postal facility into new-age commercial space.
Based in Boston, Rockpoint Group has spent considerable amounts of capital locally since its launch in 2003, with Real Reporter first to detail their eclectic 2015 spending spree that on top of landing Tower Point featured the 99 Summer St. office tower in Downtown Crossing acquired for $110.8 million and back out to the Seaport District where the luxury Boston Waterfront Renaissance Hotel was secured at a consideration of $157 million.
The pending Financial District deal involves a Newmark Capital Markets carryover from a 2016 assignment awarded the same contingent that had previously brokered the deal when CBRE Global paid $282 million in autumn 2014 for 100 High St. Should the $365 million estimate pegged by market watchers prove accurate, that would equate to $668 per sf versus the $517 per sf CBRE Global bought the 28-story tower for on behalf of a value-add fund. The landlord is credited with substantially increasing occupancy from the 64 percent rate it stood at when bought by the current ownership.
One Hub veteran familiar with both Tower Point and 100 High St. maintains Rockpoint has a similar opportunity to build upon CBRE Global’s progress downtown as it apparently has done with Tower Point. “It is a good fit for them,” the broker opines even in acknowledging the going-in basis is much higher than Rockpoint’s Seaport play.
The Financial District has certainly rebounded over the past 36 months, welcoming in a broader tenant base that has improved fundamentals and led to three straight quarters of positive net absorption, including 149,725 sf to the good in the opening frame of 2017, pushing the vacancy rate for 32.8 million sf down to 8.5 percent. The average Class A asking rent downtown is at $59.26 per sf, Newmark research reports. The figure in Q1 2015 stood at $56.18 per sf.
For Newmark, the pending completions for Rockpoint and CBRE Global continue a remarkable 2016 which encompasses over $1.5 billion in office building trades alone processed in metropolitan Boston even as its industrial, multifamily and retail units have also enjoyed a solid start to 2017.Matthew Pullen Edward Maher Robert Griffin