Research Project

WESTBOROUGH — A landmark suburban office building whose value— and occupancy—have plunged this decade is under new ownership following Friday’s $21.5 million purchase by Ferris Development, a Metro West-based concern that paid less than half what the 296,000-sf property last changed hands for in Oct. 2005, back when an Illinois state pension fund doled out $55.5 million for One Research Dr. at the height of the mid-2000’s CRE boom. “We’re calling it back-to-the-1980’s pricing,” company namesake David M. Ferris tells the Real Report in noting the 30-acre campus originally housing GenRad traded for $26 million in 1986 at just five years old—even more than what FD paid for it—and then fetched $43 million (Berkeley Investments in Oct. 2001) prior to the pension fund gambit that faltered when the 2008 recession crippled Interstate 495’s office market. At near 100 percent filled when acquired, the landlord saw occupancy plunge to 50 percent at the time of Friday’s closing.

Laden by debt, its owner was also impacted when austerity dampened demand for best-in-class options that One Research Dr. has long aspired to—and should be regarded as, stresses Ferris, explaining he intends to enhance base building upgrades by Berkeley and the pension fund with an “ambitious capital campaign” backed by Northern Bank & Trust Co. financing of $16.5 million and private equity from high net-worth investors similar to Ferris himself, previously using his own monies to buy buildings in Marlborough, Littleton and Southborough, continuing a theme of staying in the MetroWest despite its protracted downturn. “I really think 2014 is going to be all about return on investment in the MetroWest,” says Ferris, with Class A product the most attractive to companies migrating westward, a number of which Ferris is banking on being technology tenants hoping to attract talent.

“We’re really excited,” says Ferris. “We have a pretty ambitious capital campaign and we are going to aggressively compete for tenants,” with plans already afoot to improve bathrooms, create a “technology café” where employees can gather informally, and a state-of-the-art conference center. Common area improvements will feature granite and marble-level material, he conveys, adding those expenses are further set off by having a crack construction team inhouse, ala Campanelli or Cummings Properties that Ferris argues provides greater control on costs and fosters turnkey solutions. “We think it’s a tremendous advantage,” he says. In some respects, Ferris casts his Westborough undertaking as a super-sized version of 352 Turnpike Rd., a 70,750-sf, Class B building bought 70 percent empty in Jan. 2012 and now nearing full occupancy after being given a higher stature through capital improvements. Projections are “far” ahead of schedule due to what Ferris credits the construction expertise and a successful leasing campaign.

Transwestern | RBJ brokers John M. Lashar, Paul A. Leone and Brian McKenzie have been tabbed as leasing agents at One Research Dr., the same team LPC had utilized after being named asset manager in 2013. LPC Realty Advisors President Jenifer Ratcliffe and Vice President Brian K. Lantz were cited by Ferris for a “fantastic” effort advising the pension fund, plus Northern Bank was lauded for structuring the financing that includes a $5.5 million line of credit, but Ferris gives Lashar particular kudos for knitting the agreement together by approaching LPC and making a pitch.

“John is the consummate deal-maker, and he was able to convince them that we were the natural buyer,” recounts Ferris. “We are extremely grateful to him for all the hard work he did in putting this together.” Strong suits included a certainty of closing, outlines Ferris, especially facing a constricted time frame requested of the seller (who ironically then asked for an extension until Friday). The proven track record includes buying 352 Turnpike Rd. in Southborough for $3.75 million and 325 Donald Lynch Blvd. in Marlborough, FD’s first CRE investment that occurred in Aug. 2010 when he paid a mere $2.0 million for one of suburban Boston’s most opulent office buildings. The one-time home of Eastern Insurance that came fully bedecked in fine art and furniture is today 100 percent filled, and perhaps the least value-added of the current bunch that also includes 295 Foster St. in Littleton a former Hewlett Packard property that is also undergoing brisk leasing on a team led by Marci Alvarado of Parsons Commercial Group. Ferris estimates some 55,000 sf of its 101,000 sf is on the verge of being filled in another resurgent community.

Ferris reports an economic energy is rising throughout the region, into which he argues One Research Dr. deserves title as “the best building in the center of the MetroWest,” or so is intended to be branded as such in the leasing initiative that has already commenced by retaining Lashar, Leone and colleague Brian McKenzie.

Ferris says the line of credit can be used to help fund tenant improvements and broker commissions, with the intent to make a move as seamless as possible given that many firms have been inking only short-term leases while it remained a tenant’s market. Now facing a dearth of options and escalating rents, “The timelines are getting shorter,” says Ferris, especially for large tenants who he maintains can benefit from the sheer size of One Research Dr. and floor plates exceeding 70,000 sf., although the planned multi-tenanted strategy will also reach out to firms needing as little as 5,000 sf.