A recent Boston Magazine piece on Jack Connors (co-founder of Hill Holliday, Boston College alum and heir to the late Ted Kennedy’s position as city patriarch) noted, quite rightly, that the Hub is somewhat unique among major American cities in that no single industry dominates its cultural identity. In New York, Wall Street is (still) king. DC is lobbyists and Senate Bean Soup. Houston – oil; Los Angeles – alcohol monitoring ankle bracelets. (Not quite over the Lakers yet.) But Boston’s a bit odd – an amalgam of students, doctors, mutual fund managers, Democratic politicians and Democratic mobsters.
And let’s add commercial real estate to the list, as Boston may be among the first metro-areas to awaken from the malaise that has defined commercial real estate for recent memory. Last week – only days after announcing its acquisition of Bay Colony Corporate Center (a story covered here) – Boston Properties announced that it had come to agreement on the acquisition of the Hancock Tower, for $930 million, a stunning conclusion to a distressed-debt success story and the beginning of what some brokers are citing as evidence of a resurgence in demand for trophy office buildings. To give you a sense of the marketing and sale process, Rob Griffen of Cushman and Wakefield (Boston College, ’80) told the Globe that the bidding was “as fierce as anything [he’d] ever handled during [his] 30 years in this business.”
This is a really encouraging story – a successful distressed-debt play on a big-time asset and one of the largest CRE trades in the country this year. The Hancock Tower was acquired by Normandy/Five Mile in 2009 for $660 million (give or take) – a number that put a point on exactly how far values had fallen (the defaulting borrower had taken the building down in 2007 for $1.2 billion). Normandy/Five Mile was smart and aggressive in acquiring debt at the right levels – and then – maybe more importantly – had adequate know-how and sufficient dry ammo to turn things around (re-purposing underground space for parking, building a new lobby restaurant, earning LEED certification, and inking a 15 year lease to Bain Capital for 200,000 sq. ft.).
I (Boston College A&S ’97, Law ’00) sit on the 27th floor of the Hancock and have watched this story play out – as tenant, participant, observer and blogger – for the better part of five years. Each night, beginning at dusk, you can watch as large bands of dark space begin to stripe the building’s tenanted floors – the outward scars of rolling leases that were never replaced as the credit markets ceased and the bottom fell out of everything. Is this story an aberration? Without doubt; the owners seemed fully ready to carry the building for another 4-5 years. Getting out in 18 months with a massive gain sui generis for certain. But it seems that, soon enough, when I leave at night, there won’t be as many dark windows.
By Matt Clark.