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January 10, 2011 
Mt. Vernon's Rise

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Say what you want about public schools, but we know that r-e-c-e-s-s-i-o-n spells opportunity. Mt Vernon Co founder Bruce Percelay has evidence: The Boston market is on the rise, albeit without the big bargains of the ‘90s recession when his firm came into its own. Last month, he did deals (mostly multifamily) valued at about $50M.

Bruce Percelay
We snapped Bruce in his Back Bay office (as he just happened to pick up Nantucket, which he publishes). During the ‘90s recession, Wall Street and institutional investors viewed multifamily rentals as an an asset class for “sissies,” he tells us, with steady returns and 10% cap rates. But that worked for Mt. Vernon: It amassed 1,400 units including some it bought for $85/SF, now valued at $700/SF. Later, Wall Street and institutions investors discovered apartment buildings and now, he says, cap rates are more like 5%, mirroring multiples of public companies.
treasurer James Garn

We snapped Liz Morency with treasurer James Garnache, who says with today’s lower returns Mt. Vernon focuses on adding value. First, they upgrade common areas, then as tenants vacate, they renovate apartments to condo standards. Bruce says he only rents apartments he would want to live in and his management team provides Class-A service even for buildings in B locations. Of course, rents are commensurate. Annual tenant turnover in Mt. Vernon properties is about 20%, compared to the more traditional 30%. 

Allsion xxxxx with Jay Bisognano

We're going to call that an invisible football that Jay Bisognano is holding, as he quarterbacks projects and acquisitions. (He's standing with Alson Askinazi.) When Mt. Vernon looks for a building to buy, it targets assets that are convenient for the well-educated people who work in healthcare, higher education, and life science and technology, the sectors that have insulated the regional economy from some of the worst effects of the recession. In its existing Charles Street apartment buildings, 65% of the tenants work at MGH and the rest in Kendall Square. Bruce says intelligent people make good tenants. They’re more thoughtful and responsible. They also attract investors to Boston. Bruce says, “Money follows the brains.” (Guess naming Mark Zuckerberg Time Man of 2010 was no fluke. The decade of the nerd continues.)


Meet Our Sponsor: Bingham McCutchen

Bingham McCutchen partner Rich Toelke
Bingham McCutchen partner Rich Toelke will moderate Bisnow’s Multifamily Summit tomorrow (sign up now!) and knows many of the panelists well. His firm has worked with The Berkshire Group and AvalonBay, both sending execs for our panel. “We’ve been representing Berkshire Group as their lead transactional counsel for about eight years,” Rich tells us, noting they’ve recently worked on deals in California, Maryland, Texas, Pennsylvania, and the Northwest. On the Faxon Park property deal in Quincy, Bingham repped CBRE investors multifamily group in its purchase from AvalonBay. Rich says ’11 should remain strong for multifamily given low interest rates, low vacancies, and limited new construction. What else? Expect lots of competition for core product in key urban areas. More info on Bingham McCutchen here. And it's not to late to get on the list for tomorrow.


JLL Market View

Tamie Thompson, Dermot Roe and Peter Bekerian

Cambridge, particularly East Cambridge, is leading the regional markets out of the recession, according to JLL's Peter Bekarian, right, whom we snaped at JLL's market briefing Wednesday with Tamie Thompson and Dermot Roe. The biotech and life science companies that predominate the CRE space there, much of it labs, were not deeply damaged by the recession. As a result, Greater Boston ended the year with net absorption of 264k SF, compared with the negative 499k SF registered a year earlier. Average asking rents, $41.89, are up from $39.98 at the end of ’09. In Boston, Bill Motley (not pictured) tells us a flurry of Q4 leases by law firms et al seeking to take advantage of favorable terms will make the early ’11 pipeline somewhat slimmer than anticipated.  

Scott Jamieson

Scott Jamieson tells we’re still far from an average investment sales market, but ’10 was better than ’09, and ’11 will be another growth year. As prices trend toward “normal,” Scott is seeing more willing sellers, including special servicers. Lenders are starting to take back assets, winding down the “extend and pretend” scenario of recent years. Scott tells us some local banks want to move assets off the books ASAP. Sales activity is being supported by a debt market that came back faster and stronger than anticipated through all the usual channels: banks, life companies, and CMBS conduits. In some cases, good sponsors with good assets are seeing the return of IO and non-recourse loans. With all submarkets closing ’10 with positive absorption, “capital wants to be in Boston.”


Please send your ideas to Susan Diesenhouse, susan@bisnow.com.

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