Region's biggest office landlord pursues

'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could probably pay the mortgage, but the properties are worth less now, and they don't want to make payments based on outdated values."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, 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


  Wells Fargo Center: 999 Third Ave.

  1201 Third Ave.: Formerly the Washington Mutual Tower. (Owned in joint venture with Wright Runstad.)


  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

The Next Tycoon

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 morning mist off Lake Winnipesaukee was rising gently toward the clear Wolfeboro, New Hampshire, sky as a select group of corporate executives gathered on the sweeping lakeside estate of Paul Montrone, chairman and CEO of Fisher Scientific International, a maker of test tubes and other scientific equipment. They had assembled with their spouses on this soon-to-be-sultry day in August of 1997 for Montrone's celebrated Wolfeboro Classic bocce tournament, an annual weekend gathering of the elite. Among those invited: real estate investment czar Sam Zell, founder and chairman of Chicago-based Equity Office Properties Trust and a man with a commercial appetite the size of a high-rise, and Alan Leventhal, son of the legendary Boston developer Norman Alan Leventhal and CEO of Beacon Properties, whose industry-leading returns on investments had turned more heads than a Manny Ramirez poke over the Green Monster.

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.

Alan Leventhal Boston


The Next Tycoon 

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.

By Greg O'Brien  2004 ?

-- 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.

...What is important
in terms of driving return is how you increase value through the operation of the asset.

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.

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.

Beacon Capital Partners
M Street
Washington, DC

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.”

Alan Leventhal Beacon Capital Partners
Bank of America Plaza
Los Angeles

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.”