M Street
Washington, DC
'strategic default' to modify loan
By
Eric Pryne
Seattle
Times business reporter
April
24, 2010
The region's biggest office landlord, which
already defaulted on its loan on the Columbia Center, is playing a high-stakes
game of chicken over another mammoth loan it took out three years ago to buy
nine more office towers or complexes in Seattle and Bellevue.
Here's more evidence of the Seattle office
market's troubled state:
The region's biggest office landlord, which
already defaulted on its loan on the Columbia Center, is playing a high-stakes
game of chicken over another mammoth loan it took out three years ago to buy
nine more office towers or complexes in Seattle and Bellevue.
Boston-based Beacon Capital Partners borrowed
$2.7 billion to buy the Seattle-area properties and 11 others in the
Washington, D.C., area in 2007, at the height of the real-estate boom. The
package included the 47-story Wells Fargo Center in downtown Seattle and the
27-story City Center Bellevue in downtown Bellevue.
Now, according to a recent report by
credit-rating agency Standard & Poor's, Beacon says that in 2010, after
subtracting expenses of operating the 20 buildings, its rents from the
properties will cover just 20 percent of its debt payments.
And Beacon says it isn't willing to pump any
more of its own money into leasing, improving or paying debt on the buildings
without a "meaningful loan modification," according to the rating
agency.
Standard & Poor's analysts Barbara Hoeltz
and James Digney wrote that "due to imminent default," handling of
the loan was transferred April 7 to a "special servicer" who deals
with troubled debt.
But real-estate observers in New York and
Seattle said it's not a sign of desperation, but most likely a move by Beacon
to get the interest-only loan modified and extended well before it matures in
May 2012.
"We're seeing a lot of these 'strategic
defaults,' " said Ben Thypin, senior market analyst with Real Capital
Analytics, a commercial real-estate research firm in New York. "Beacon
could probably pay the mortgage, but the properties are worth less now, and
they don't want to make payments based on outdated values."
Beacon has plenty of cash, said Sven
Goldmanis, partner at Bellevue brokerage Regency Group. "But if they're
paying the bills on time," he said, "then nobody's going to adjust
anything."
A Beacon spokesman declined to comment. But a
person familiar with Beacon's thinking said the firm is indeed working to
renegotiate the loan, not walk away from it.
The debt's transfer to the "special
servicer" came at Beacon's request; it was required before restructuring
talks could start.
In addition to Wells Fargo Center and City
Center Bellevue, the Seattle-area properties in the loan portfolio include the
23-story Key Center and 16-story Plaza Center, both in downtown Bellevue, and
the Sunset North complex in Eastgate.
Also part of the package: Beacon's 63 percent
interest in downtown Seattle's 55-story 1201 Third Avenue, known until recently
as the Washington Mutual Tower.
Beacon bought those properties, the Columbia
Center and four other Seattle-area office buildings — all once part of the
Equity Office Properties portfolio — in April 2007 in the biggest real-estate
transaction in the region's history.
Each of the nine properties was between 92
and 100 percent leased, according to loan documents prepared at the time. Since
then, occupancy has plummeted in those office buildings and across the region.
More than 25 percent of the space in the
Wells Fargo Center and 30 percent of the space in City Center Bellevue is
listed as available on Officespace.com, a commercial real-estate
database.
Beacon bought the buildings anticipating the
Seattle office market would remain strong and rents would rise, said Josh
Stuart, an associate at brokerage Flinn Ferguson, which represents office
tenants.
Instead, he said, Beacon's buildings
"are struggling with some massive losses" as many tenants downsize or
relocate to other buildings.
The $2.7 billion loan Beacon took to buy the
buildings was split into eight smaller notes that were repackaged with other
real-estate loans and sold as commercial mortgage-backed securities by Morgan
Stanley, Bear Stearns, Wachovia Bank and Bank of America.
Status reports filed this month by the
administrators of each of those securities packages indicated Beacon had made
monthly interest payments at least through March.
Real Capital Analytics' Thypin and Manus
Clancy, senior managing director of New York-based Trepp, which tracks
commercial mortgage-backed securities, said Beacon's bid to modify the loan
stands a good chance of succeeding.
"It's another case of loans being made
very late in the real-estate cycle that from a valuation standpoint were real
reaches," Clancy said.
Partly because of that disparity in value,
lenders don't want to foreclose on office towers. And a big borrower like
Beacon has more leverage than a homeowner who's underwater on his house.
Beacon financed its largest 2007 Seattle-area
acquisition, the 76-story Columbia Center, in part with a separate $380 million
loan, also packaged into commercial mortgage-backed securities.
A report filed last week by that package's
administrator, Wells Fargo, indicated Beacon hasn't made a payment since early
February, and the loan is now two months delinquent.
Eric
Pryne: 206-464-2231
Local
pieces of a $2.7 billion package
Seattle
Wells Fargo Center: 999 Third Ave.
1201 Third Ave.: Formerly the Washington
Mutual Tower. (Owned in joint venture with Wright Runstad.)
Bellevue
City Center Bellevue: 500 108th Ave. N.E.
Plaza Center and Plaza East: 10900 and 11100
N.E. Eighth St.
Key Center: 601 108th Ave. N.E.
Sunset North: Eastgate Way and Southeast
139th Street
Eastgate Office Park: Southeast 30th Place
and 154th Avenue Southeast
Lincoln Executive Center: Southeast 34th
Street and 146th Avenue Southeast
Source: Beacon Capital document
Alan
Leventhal (L), chairman of Boston University's board of
trustees
The scion of a family that helped build Boston sold his father's firm and
started again from scratch. Now, just six years later, he's back on top.
The premise of the occasion may have been a genteel game of lawn bowling,
but acquisition was in the pine-scented New England air. Dressed casually but
with appropriate élan, Zell and Alan
Leventhal played on opposing teams. And while Leventhal lost
the match, it would be his last setback of the day. Over a light lunch, the
talk turned swiftly to business, nudged along by Montrone, a former member of
the board of Beacon Properties.
Suddenly, Zell was floating the idea of a buyout. Alan Leventhal,
drilled by his father to put the interests of their stockholders first, was
interested. "Sam wanted to expand, and our portfolio matched him very
well," Leventhal recalls. Zell continued his pitch for 20 minutes before Alan Leventhal
stopped him short. "Sam, there are no social issues here," he assured
him. "It's just a matter of price." After a few followup
conversations, the corporate titans met again two months later for a dinner
meeting at Leventhal's parents' waterfront condominium. Four days and $3.9
billion later, Alan Leventhal
-- with characteristic stealth and speed -- struck a deal. It was the same
stealth and speed he would apply six years later when he turned the tables on
Zell. That was when Beacon Capital Partners, the new company Alan Leventhal
started after selling off the old one, bought the prized John Hancock complex
right out from under Zell's Equity Office -- by then Boston's leading landlord
-- and other heavyweight suitors, including New York? based Tishman Speyer.
Leventhal's winning bid for Boston's signature building: $910 million. There
were no social issues here. It was just a matter of price.
The scion of a family that helped build Boston sold his father's firm and
started again from scratch.
Now, just six years later, he's back on top.
-- Alan
Leventhal, who is 51, doesn't even remotely look the part of real estate
"tycoon" or "gorilla," as the Boston Herald and Boston
Globe, respectively, have called him. He looks more like a Little League dad in
a suit. But he's back in the Boston big leagues, already poised to have as
significant an influence on commercial real estate investment and development
as his father did before him.
Bullish on the city, he sees a bright future for Beacon Capital and for
Boston, as much a part of the Leventhal legacy as the family tree. Just look
out the window of a corner office on the 26th floor of One Federal Street,
headquarters of his Beacon Capital Partners -- only five years old and already
one of the nation's leading real estate investment companies. Rising from the
streets like soldiers on review is a platoon of buildings developed under the
long and prosperous watch of Norman Leventhal: the Meridien hotel, 75 State
Street, nearby Center Plaza, Rowes Wharf, and One Post Office Square on the lip
of tranquil Norman B. Leventhal Park, to name a few.
The Leventhals are to development and real estate investment in Boston
what the Kennedys are to Massachusetts politics. And they date back just as
far.
"When you talk about what Beacon Capital has accomplished over a
short period of time, you have to go back to 1946," Leventhal says in a
rare boast during an equally rare interview. Fifty-seven years ago, Leventhal's
father and his uncle Robert started the Beacon Construction Company, which
later expanded into the Beacon Companies. "My father and my uncle taught
me that if you do the right thing for your investors -- even though in the
short term you have some doubts -- in the long term you will do well,"
Leventhal says. And in spite of Beacon Capital's tower-like rise in five years
-- $2 billion in acquisitions nationwide in the last 18 months, half of it in
Boston, including the Hancock deal and the $123 million purchase of 501
Boylston from MetLife -- Leventhal says his company's investment strategy was
firmly in place five decades ago. "It is a belief that cities like Boston
that have a very high concentration of knowledge content -- colleges and
universities, teaching hospitals and urban, core residential units, a place
where people want to eat, live, congregate, and work," he says,
"that's where you want to invest."
Freshly minted MBA in hand, Alan Leventhal walked out of Dartmouth's Tuck
School in 1976 and into the family business, helping the Beacon Companies build
its aggressive office portfolio. It was the same year the Hancock Tower
welcomed its first tenants. Eighteen years later, Leventhal formed a separate,
independent company, Beacon Properties Corporation, and took it public.
Over the next three and a half years, the company grew tenfold in value
from $400 million to $4 billion with an astounding annual compounded return of
42 percent and a total return of 245 percent. "We did it in six major
markets with a very focused strategy in Boston, Washington, Atlanta, Chicago,
San Francisco, and Los Angeles," Leventhal says now. "Our
knowledge-based strategy was built on successes in Boston, buying mostly
unique, urban assets -- not commodities. When we went public, there weren't
many believers. There was an attitude at the time that cities like Boston and
San Francisco were dead."
The funeral became a bar mitzvah, and Leventhal quickly grew in stature
as a brilliant analyst with a cool knack for bucking conventional wisdom and
for knowing when to buy and when to sell. He confounded observers in 1997 when
he sold Beacon Properties -- his legacy at midlife -- to Zell. "It was the
right thing for the shareholders," says Leventhal, reciting the family
mantra. The Monday after the sale was announced, most of the 1,000 employees at
Beacon Properties were stunned. Leventhal called a meeting to tell his
employees they no longer had jobs. "Do whatever you have to do," one
told him, "but it's just a wonderful company." Leventhal choked up.
"I was about to break down," he recalls. "I declared, 'Okay, the
meeting is over.'" Leventhal was out of a job, too. "I was walking
around asking myself: What am I going to do? For the first time in my life, I
had no direction." The drift didn't last long.
The deal with Zell closed in December; by the first week in January
Leventhal was back in business with a new company, Beacon Capital Partners.
Buoyed by Leventhal's performance, his stockholder allegiance, and a timing Ted
Williams would have envied, investors queued up. "He could have packed it
all in and gone to the beach," says John Fowler, executive managing
director of Holliday Fenoglio Fowler, who has done business with Leventhal for
25 years. "He has incredible team loyalty and has created a lot of wealth
for many." Thomas J. Hynes Jr., president of Meredith & Grew, says Leventhal's
strength is that "he thinks strategically where others think tactically.
And that attracts a lot of investors." Leventhal has never appeared
ego-driven, something else that has built investor confidence over the years,
says Robert Lieber, managing director of Lehman Brothers' Global Real Estate
Group, which provided financing for the Hancock sale with Morgan Stanley.
"He doesn't fall in love with himself," says Lieber, "or his
acquisitions."
Leventhal never missed a beat. Begun with 32 employees -- including many former
senior managers from Beacon Properties -- the newly formed Beacon Capital
Partners raised $470 million in initial capital in 1998 and invested $321
million of it in four Kendall Square properties, including Tech Square and One
Kendall Square. Leventhal sold the buildings two years later for $610 million.
In 2000, Leventhal created Beacon Capital Strategic Partners and raised $287.5
million for its first fund. In a blink, he used that fund to buy a prime office
building at 415 Fremont Street in San Francisco, which he sold almost
immediately to Charles Schwab, giving investors a 217 percent profit before any
capital was even called. The fund didn't make its first foray into Boston
proper until 2000, when it invested $40 million in Channel Center, a planned
mixed-use development in the Fort Point Channel district.
Last year Beacon Capital created the largest office-focused fund in the
country, Beacon Capital Strategic Partners II, with $740 million in capital.
Since this fund became active, its more than $1 billion investment in Boston
has turned the most heads -- first 501 Boylston, longtime headquarters of New
England Financial, and then the stunner, in March, against all odds: John
Hancock's rhomboid-shaped glass tower, plus its buildings at 197 Clarendon
Street and 200 Berkeley Street. Word on the street, and for a time in the
media, was that Leventhal's bid couldn't possibly succeed.
Yet in an irony sweeter than Queen Anne corn, he bested both Zell and
Tishman Speyer, the deep-pocketed company that owns Rockefeller Center.
"We knew at the end of the day, John Hancock was concerned about price,
certainty, and who would be their landlord," says Leventhal. "All we
could do was worry about communicating that, and not about what anyone else was
saying." It was no surprise to Leventhal, he says, when Beacon Capital
prevailed. "The Hancock is an irreplaceable asset in the heart of the Back
Bay, which has only improved over time to become a diversified office
location," he says.
Leventhal, as he likes to say, is "bullish" on Boston and expects to
continue investing here. "We have an incredible city," he says.
"We're concerned about the short term. I don't see any meaningful recovery
for 12 to 24 months. But in long-term fundamentals, we think Boston is a
fabulous market." Will short-term angst slow his pace? "The best
answer to that question," he says, "is the Hancock complex and 501
Boylston." There are other signs -- besides the brick-and-mortar kind --
of Leventhal's deepening involvement with the city. A major political
fundraiser who has helped stockpile cash for Senator John Kerry's presidential
bid, he was named by Mayor Tom Menino to cochair the host committee
for next year's Democratic National Convention here. "He's focused, has
strength and character, and believes the best years in Boston are yet to
come," Menino says. Leventhal's biggest cheerleader is his father.
The two talk daily. "I'm very proud of him," says Norman
Leventhal, who at 86 remains as much engaged in Boston civic affairs and
professional issues as many people half his age. "Maybe Alan is like his
mother. I don't know," the MIT-trained patriarch muses. "He's a bit
different from me. I think like an engineer; he thinks like a businessman. His
approach is different than mine, but in the end our values are the same."
"He has a quiet tenacity," says Beacon Capital president Fred Seigel.
"There's a continuity in Alan, but he's flexible. People here know what he
stands for."
In an uncharacteristic moment of self-reflection, Leventhal himself, who
acquired a 36-story office tower at 10 Universal City Plaza in Los Angeles for
$190 million from Vivendi Universal of France before the ink had even dried on
his Hancock purchase, admits to having "intensity." He says his
father is "the most calm, even-tempered, mild-mannered" person he's
ever known. "You ask him how he is and he has one word for you:
"Perfect!' And he says it in such a nice way; there's a serenity to
it." By contrast, Alan Leventhal says, "If I'm unhappy about
something, I'll state it. I'll be very direct about it. I'm not a screamer, but
I'm clear."
Leventhal confided to a friend recently that he was puzzled about how his
father managed to remain so much more serene than he is. "I don't
understand it. When bad things happen, I get upset," Leventhal told his
pal. "I express myself. Things bother me."
The friend, who worked closely with Norman Leventhal in the early years,
when the stress of doing business in Boston was as intense as the pressure
built up in the boilers that heated Leventhal's buildings, told him bluntly:
"Don't think for a second that you're not like your father!"
It was a compliment of Hancock Tower proportions.
Looking For Opportunity - Beacon Capital Partners
Beacon Capital Partners knows a bargain when it sees one. Since its debut eight
years ago, the Boston-based private real estate fund and asset manager has been
snapping up office properties at a fast clip, outbidding rivals and paying top
dollar. This year is no exception. As of June 30, Beacon has contracted or
purchased $5 billion in both U.S. and European office properties.
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Beacon’s recent purchases include $425
million for an office tower in Boston, at approximately $418 a square foot, and
$130 million—$318 a square foot—for a 24-story building in Bellevue, Wash., in
May 2006. Meanwhile, Beacon also made its first splash into European waters
this year, buying two properties in London and Paris totaling more than $1
billion. Beacon Capital owns four closed-end commingled funds with a REIT
embedded in each of the structures.
This is all part of Beacon’s strategy: buying well-situated office properties
and then selling them years down the road for significant profit. The key:
focusing on cities with tight supply, where there are highly educated
workforces and a high concentration of colleges, universities and teaching
hospitals.
“What we look for are buildings that are difficult to replace,” says Alan Leventhal, chairman and chief executive officer of Beacon. “We don’t want to buy
commodities. We want to buy unique assets.”
That strategy has paid off handsomely over the years. Since opening its doors
in 1998, Beacon Capital has generated a gross cumulative return ranging from 17
percent to 51 percent for its company portfolio and its closed-end funds.
Beacon has amassed an $8.8 billion portfolio in 10 cities overall, including
its first foray into New York last year.
Investors like what they see. In April, the firm closed its fourth commingled
fund, Beacon Capital Strategic Capital IV, with $2 billion in equity capital,
easily surpassing its goal of raising $1.75 billion. The fund’s objective is to
acquire office properties in the U.S. and Western Europe with a total cost of
$7 billion to $8 billion. It has already closed or agreed to buy 11 properties,
representing $2.6 billion, including the London and Paris acquisitions.
Longtime investors praise the 54-year-old Alan Leventhal for his honesty and integrity—as well as his ability to find gold in
places where others do not. John Myers, former president of GE Asset
Management, who left the pension fund in July after running it for 20 years,
says Leventhal has a knack for generating solid returns. “He has proven to be a
brilliant investor,” Myers says. “He understands all facets of the real estate
market. He recognizes that real estate is an opportunistic asset class. He has
a great nose for finding value in situations.”
Cornell University, with $4.5 billion of assets under management and a 10
percent concentration in real estate, was an early investor with Beacon
Capital. Howard Milstein, chairman of the Cornell Real Estate Committee and
chairman of Milstein Brothers Capital Partners in New York, says Leventhal brings
the combination of local knowledge and market capability, along with the
contacts and scale to compete nationally. “The risks that Alan takes are modest
and the returns are outstanding,” Milstein says. “I don’t know of anybody who
is in his league on a risk-adjusted basis.”
Treasure Hunters
Indeed, over the years, Leventhal and his team at Beacon have uncovered some
gems. Most notable is Beacon’s purchase of Boston’s John Hancock Tower in 2003,
paying $910 million for New England’s tallest building, which this year
celebrates its 30th anniversary.
But there are other deals not as sensational in name as they are in profit. In
one earlier transaction, Beacon purchased BP Plaza, a 55-story office tower in
downtown Los Angeles for $270 million. Beacon then resigned a major tenant for
350,000 square feet, representing a quarter of the space. It also managed to
squeeze another $500,000 annually from parking revenue. Then it signed on Bank of America Corp. for 157,000 square feet, and renamed the building Bank of America Plaza.
In 2004, Beacon sold the building for $435 million, capturing a $165 million
gross profit in two years. Deals like these have benefited from real estate’s
updraft in prices in recent years.
Along with buying hard-to-replace
assets, Beacon pursues a strategy of aggressive leasing and capital
improvements. Aside from these typical methods, Beacon also has worked to
improve its buildings’ energy efficiency, which also helps the bottom line. For
example, The John Hancock Tower recently won a merit award from the
Environmental Protection Agency, which calculates the building’s annual energy
bill to be $3.5 million less than similar buildings, as a result of
conservation improvements.
“When we identify these assets in the market and buy them, the question then
is, ‘How do we add value?’” Leventhal says. “What is so important in terms of
driving return is how you increase value through the operation of the asset.”
Getting a Solid Start
Leventhal’s acumen and instinct began at an early age. His father, Norman
Leventhal, formed Beacon Cos. in 1946, developing buildings across Boston. Alan
joined the company after graduating with an MBA from Dartmouth College’s Tuck
School of Business in 1976. In 1994, he became chief executive of Beacon
Properties after taking the company public by spinning off the office division
from the Beacon Cos. That helped give Leventhal the scale to launch his
approach nationally.
After starting with an initial market capitalization of $400 million, Leventhal
sold Beacon Properties for $4 billion in 1997 to Equity Office, the REIT
founded by real estate legend Sam Zell. All told, in Beacon Properties’ short
life span, Leventhal and his company engineered an annual return of 42 percent
for investors.
While Alan
Leventhal was out of a job in
December 1997, he was far from riding off into the sunset and was immediately
able to start Beacon Capital Partners with colleague Lionel Fortin in 1998. “We
closed the transaction, and in early January, I was back in business,”
Leventhal says.
He and Fortin approached longtime investors, such as GE, to start a private
fund. Beacon raised $470 million of equity capital with a 144(A) private
placement, using an internally managed REIT Beacon quickly went to work,
eventually raising $875 million, which, by the end of 1999, was fully invested
in a portfolio of properties that ultimately generated a 17 percent cumulative
rate of return once all assets were sold. Its subsequent funds have done even
better. Beacon Capital Strategic Partners I, a commingled fund closed to
investors in 2000, has generated a cumulative return of more than 35 percent.
Strategic Partners II has notched a 51 percent return, while Strategic Partners
III has gained a 19 percent return, and has yet to sell most of its assets.
With each fund, Beacon tends to hold properties for approximately a five-year
period. Once the assets are sold, profits are passed along to investors, with
Beacon taking a slice of the gains above the fund’s stated return objective
(Beacon also charges a management fee). Most of its building management is done
by third parties.
With all the funds, Beacon has no doubt been active in the office market. In
terms of total projected value, Beacon Capital has invested in $13 billion
worth of properties over the last five years. Nearly a quarter of the value—23
percent—is invested in Washington D.C. properties, with Boston representing its
second largest concentration at 16 percent. About 15 percent is in San
Francisco, and 14 percent is in Los Angeles. The rest of the portfolio is
spread among six other cities: New York, Chicago, Seattle, Denver, London and
Paris.
With all the growth, Beacon Capital Partners’ size now surpasses that of its
predecessor REIT, Beacon Properties. Its current $12 billion portfolio is
bigger than the listed REIT’s $4 billion market capitalization when it was sold
in 1997. Now, Beacon Capital oversees 30 million square feet, compared with
23.7 million square feet before the listed REIT, Beacon Properties, was sold.
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Building the Right Team
Beacon Capital has managed to do it all with a lean shop. It has a staff of
about 45, versus 1,000 employees when Leventhal ran the REIT. Among the current
team are key managers from the Beacon Properties days: Douglas Mitchell, a
senior managing director oversees leasing operations and capital improvement;
Jeremy Fletcher, a senior managing director, runs the West Coast operations;
and William Bonn, a senior managing director, is general counsel. After partner
Fortin retired in 2001, Alan Leventhal hired Fred Seigel—a friend, investment banker, and businessman—as president and chief
operating officer. In the past two years, the firm has added key hires in New York,
London and Paris.
Over the years, Leventhal has managed to engender loyalty among his staff,
along with respect from those on the other side of the table, says Bob Lieber,
a managing director at Lehman Brothers, who has worked with Beacon on both sides
of its transactions. “He takes a very personal interest in the business and in
the transactions they make,” Lieber says. “For him, it is incredibly important.
Relationships mean a great deal to him. It’s not just about the deal.”
Picking Properties
Alan
Leventhal is taking his strategy
for choosing the right office properties across the globe. Across the Atlantic,
London and Paris office markets show the same characteristics that appeal to
Beacon: rising rents in highly educated markets, with office supply that is
constrained and difficult to replace. “The types of things we are experiencing
here in the U.S. we are also seeing in London and Paris,” Leventhal says. “You don’t see significant new supply, and given the amount of
demand over there, it points to an attractive time to invest.”
That same strategy also carries to suburban office parks. In May, Beacon signed
an agreement to buy Westchester One, a 21-story office tower in White Plains,
N.Y. Beacon agreed to pay $181 million, about $213 per square foot. Beacon also
closed a deal in January for Skyline Tower, a 24-story building in Bellevue,
Wash., for $130 million, or $318 a square foot. Last year, Beacon paid $276 a
square foot for Bay Colony, an office park in Waltham, Mass. and scooped up 12
properties in suburban Washington, paying prices ranging from $200 to $450 a
square foot, according to figures tabulated by Real Capital Analytics.
While the prices might seem high, Beacon factors another variable into its
evaluation of its properties: what the value of replacing the asset would be at
the time of a future sale. “What we focus on more than anything else is the
cost to replace the asset,” Leventhal says. “We look to see if we can sell a
building in five years’ time at some significant discount to the replacement
cost then.”
That philosophy seeps into all of Beacon’s decisions. “They are pretty
consistent with staying with what they know,” Lieber says. “That is in large
part a by-product of the focus Alan brings to major urban office properties.”
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To be sure, Beacon’s properties have
uniqueness. The Hancock Tower gives tenants unobstructed 360-degree views.
Because of zoning restrictions, the chances of getting another 60-story
building built in Boston’s Back Bay section are slim to none. Its Bay Colony
property is situated in what is considered the best region along Boston’s
technology corridor, Route 128. “Waltham is the best location, and this is the
premier location within Waltham,” Leventhal says. “We just felt rents would
really start to move, which they have.”
The fundamentals still point to future gains, Alan Leventhal says: “If you can buy office buildings at some reasonable discount to
today’s replacement costs, where that replacement cost is rapidly rising and
where you see virtually no new supply coming—that provides an opportunity to
make solid investment returns.”
