Behind The Deal: 100 Cambridge St
It’s rare that a public entity develops a property that sells for a historic price. But 100 Cambridge St, a downtown office, went last week for $280M, 2015’s top price so far. How did it happen?
Intercontinental Real Estate Corp invested $145M from one of its funds (and financed the remainder) to buy the 600k SF mixed-use office tower that MassDevelopment repositioned. Why? COO Paul Nasser says the location—steps from the State House on one side and a T-stop on the other—is ideal. Also, the redevelopment was a high-quality job. MassDev, chosen by the state for the project in 2000, hired a professional team, which added a base podium clad in metal to match the original tower and red brick to blend with its Beacon Hill neighbors.
By early 2004, the 1965, 22-story tower was stripped to bare bones, given all new systems, roof, elevator cabs, windows and lobby; the developer also created separate entrances for state and private tenants and added retail and condos, says Intercontinental acquisitions director Mike Keyes. The work made the LEED Silver 100 Cambridge St one of Boston’s newest office buildings, with little capital investment required now. While conducting due diligence, Mike and his team interviewed decision makers among the tenant companies. They told the same story. During a decade managing the property, MassDevelopment was organized, responsive and professional.
The property offers stability—state agencies still lease 365k SF—and upside potential on the 250k SF leased to private tenants. Many of their leases are rolling over in the next 36 months and they're at below market rental rates, about $30/SF. The space—much of which is high-rise with unobstructed views—can fetch closer to $50/SF, Mike tells us. All around, other landlords are investing in the neighborhood. Shorenstein purchased Center Plaza nearby. The T-stop is being rebuilt and there’s a plan to give Faneuil Hall a major facelift.
Another great attraction for Intercontinental, says Paul, is that the tower's “in our own backyard.” At a time when capital is plentiful and good assets scarce, the acquisitions team (including associate director Patty Pytlik) is searching for infill properties in the city or close-in suburbs, near quality amenities and public transit. Last month, the company closed on an empty 345k SF empty office building in Parsippany, NJ. In December, it closed on its purchase of Watermill Center in Waltham from New Boston Fund.