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KBS Pitching Hub’s 50 Congress St. Via HFF; Listing Could Hit $85M

September 27, 2016 - By Joe Clements


BOSTON—Previous owners Nordblom Co. had held 50 Congress St. for eons, but KBS Capital Advisors is already cashing out on the historic Financial District office building acquired from that venerable family owned real estate operation in July 2013 for $51 million. According to market sources, the 180,000-sf, 10-story building is being offered for sale by HFF on an exclusive assignment estimated by CRE observers to be valued between $80 and $85 million, or from $445 per sf to $475 per sf

While considered a healthy sum for Class B office product, those spoken to regarding the fresh listing insist there are plenty of reasons investors could push bidding into that range, including the institutional sponsorship which made capital improvements during its brief tenure in order to position the 114-year-old mid-rise as a viable option for new-age companies which have come to prefer the ornate, more measured layouts of yore that are prevalent in the CBD. “It’s a great mix,” one market watcher familiar with 50 Congress St. says of having the old world charm and rectangular floor plates that at roughly 18,000 sf each are generous for a 100-plus-year-old downtown structure. Its shape also allows for two entrances, one on Congress Street and the other on Exchange Place and Kilby Street, providing direct access to Liberty Square.

Where 50 Congress St. is situated is deemed another strong suit, its infill site just one block off the epicenter of Main and Main—Congress and State Streets—and yet an area experiencing such transformational change that many argue the Financial District moniker is a needless relic from having a singluar function prior to the new millennium and not reflecting the vibrant mixed-use environment it is becoming featuring new housing, hospitality and retail. In fact, all three functions are on the dais at the Related Cos. overhaul of Fidelity Investments’ longtime headquarters into a luxury hotel, upscale residential and the retail long-missing from that particular block.

“It’s right across the street,” one CRE professional notes of 50 Congress St., describing the 19,950-sf parcel that takes up an entire city block as being “a dynamite location,” among the aspects grouping that industry veteran in the camp anticipating $85 million will be achieved. Also sweetening the potential is being steps away from the Norman B. Leventhal Park at Post Office Square, a verdant 1.7-acre expanse used by thousands of people daily and offering a large underground garage in a parking-bereft district.

HFF at this juncture is not responding to inquiries regarding its latest endeavor, although informational material shows the opportunity was in circulation as of Monday afternoon. The outline has the team of Capital Markets members leading the charge pegged as Senior Managing Director Coleman Benedict, Director Benjamin Sayles and Analyst Patrick McAneny.

There is no asking price proferred in the dispatch that does call the building “an extraordinary opportunity to invest in a distinguished historical asset that has significant upside potential.” One factoid suggests a winning suitor could reap the benefits fairly quickly from below market leases and a tenant roster whose average expiration date is only 2.5 years. “That is pretty fluid,” according to a broker active in the downtown market.

In its midyear office report, Newmark shows Class B asking rents in the Financial District averaging $42.44 per sf versus $58.17 per sf for low-rise tower space, with a blended average of $46.54 per sf. Tower product is averaging $60.47 per sf, according to Nemark. The low-rise floors and Class B buildings that had become a bane for landlords in the 2008 recession have been whittled down to only 6.2 percent vacancy for 9.8 million sf of inventory, Newmark relays.

Property owners of Class B buildings in the CBD continue to outperform the rest of the city which has an average overall asking rent of $44.49 per sf. One-on-one puts the Back Bay tops at $48.41 per sf, whereas North Station remains the value option for tenants at $39.11 per sf, although its vacancy rate is a mere 2.6 percent for 2.59 million sf.

In launching the new listing for KBS entity 50 Congress Street LLC, HFF does not indicate what the timing will be for initial bids. Financing wise, the California-based investor took out a $38.2 million loan from Bank of America upon buying the asset.