A tidal wave in the south

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From Michael Olson
Associate
Jones Lang LaSalle

About this time last year I was at a real estate function and was talking with a well known real estate investor. After explaining that I focused on the South submarket he exclaimed: “I would never invest in that market. Not enough activity, not enough demand.” 

It’s a good thing that other investors don’t feel the same way, as sizeable transactions with major local and international players have recently closed.

The theme that jumps out when reviewing these recent trades is that investors will tolerate the risk associated with single tenanted assets, or tenants that occupy a majority of the building, as long as that tenant has credit worthiness. Also, despite the partisan debate regarding Massachusetts budget worries, assets that house state run agencies have traded hands.

Here’s a snapshot of some of the largest recent sales in the South:
* A subsidiary of Commonwealth REIT purchased 25 Newport Ave in North Quincy for $14,000,000.

* L&B Realty Advisors out of Texas purchased 690 Canton Street, Westwood for $34,500,000.

* Synergy Investment and Development bought 200 Newport Ave, North Quincy for $25,000,000.

* Synergy made another splash in the North Quincy by purchasing 100 Hancock Street for $31,300,000.

* Texas investor Hines Global REIT, bought 250 Royall Street, Canton for $57,000,000.

It will be interesting to see if this flurry of investment activity sparks a wave of subsequent trades. Like kind buildings to those that have sold are: 2000 Crown Colony in Quincy which is fully leased to BFDS; 1200 Crown Colony in Quincy fully leased to State Street Bank; and 130 Royall Street in Canton with Dunkin Brands as the sole tenant.

Another phenomenon that could occur is users that own their buildings deciding to cash in on their occupancy by conducting sale-leasebacks. Potential candidates are OneBeacon Insurance who owns and occupies 150 Royall Street in Canton, Blue Cross Blue Shield that owns and occupies Enterprise Drive in North Quincy, and One NSTAR Way in Westwood which is owned and occupied by NSTAR.

All this activity makes me sit back and wonder what the investor I mentioned earlier is thinking? Maybe we should call him to see if he wants to make an unsolicited bid on a South market asset?

-Mike

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