Boston Properties to Buy Suburban Boston’s 1M-SF Bay Colony Corporate Center for a Song

September 28, 2010
By Barbra Murray, Contributing Editor

There are deals, and then there are deals. The 1 million-square-foot Bay Colony Corporate Center in Waltham, Massachusetts, will come under the ownership of Boston Properties Inc. with the anticipated completion of a $185 million transaction. The REIT entered into an agreement to purchase the premier office property for a sum that, when compared to the $366 million Bay Colony fetched in 2007, can be described as pocket change.

Bay Colony has experienced its share of changes over the last few years. In 2005 Beacon Capital Partners L.L.C. acquired the four-building asset for $272.5 million and in 2007, traded it for $366 million as part of a $5 billion, 24-property portfolio sale to Broadway Partners Real Estate Fund III L.P.

But in the summer of 2009, Broadway, felled by financial challenges, agreed to surrender control of Bay Colony to one of its lenders, Lehman Brothers Holdings Inc., which had provided the company with $459.6 million of bridge mezzanine debt. Later in 2009, in comes Eastern Capital Real Estate, which, as the company describes on its website, came into possession of Bay Capital after having “purchased a discounted loan position from Lehman Brothers.” And halfway through 2010, lender Prudential Financial stepped in and took the reins.

So, Boston Properties’ steal of a deal involves more debt than cash. The REIT will assume $143.9 million in existing debt in the form of a securitized senior mortgage due to mature in June 2012, and fork over just $41.1 million in cash. What the company will ultimately walk away with is one of most highly regarded office properties in the Boston suburbs. Sited on 58 acres approximately 20 miles west of Boston, the LEED Silver-certified office park consists of one three-story building and three four-story buildings built between 1985 and 1998, and carrying addresses on Winter Street. The property also features over 3,000 surface and covered parking spaces, cafés and a fitness facility. As for the tenant roster, while it is highly diverse–ranging from life sciences entitles like Cato Bioventures and Massachusetts Life Sciences Center to financial concerns such as Comerica Bank–it is not full. Approximately 235,000 square feet of space is being marketed for lease.

Boston Properties anticipates a fourth quarter closing on the Bay Colony acquisition.

Other investors have found bargains–not always bargain basement bargains, but bargains nonetheless–in the suburban Boston office market this year. Wells Real Estate Investment Trust II Inc. snapped up the fully leased, 490,000-square-foot complex at 550 King Street in Littleton for $85.5 million. While a good deal for the buyer, it was an even better deal for the seller, a joint venture of Angelo Gordon & Co. and National Development, which had purchased the property when it was vacant in 2005 for just $25 million. The complex now serves as IBM’s regional headquarters. In Lexington, Shire Plc acquired the 96-acre Lexington Technology Park, paying Patriot Partners L.L.C. $165 million in cash for the sprawling property.