RREEF, a REIT that owns the Unicorn Park complex, allowed Davis to build only if the firm was granted an option to buy the five-story structure upon its completion. After the building quickly leased up by the end of 1999, RREEF decided to exercise its option.
"It has always been our strategy to own all of the buildings at Unicorn Park," says RREEF official Eric Berke. The park now features 600,000 sf in six buildings, and will be fully built out once a 168-room Marriott Hotel is constructed there next year.
Principal Jonathan Davis says he had no compunction in accepting the arrangement, explaining that his 25-year-old company has traditionally structured its portfolio with an even mix of long-term holds and short-term investments. In some cases, as in the Unicorn Park deal, external factors determine which category it is placed into. "We couldn't have built that without an [option]," Davis says, adding that he believes the effort proved a success. "This is a transaction that worked well for them and for us," he notes.
Berke declined to discuss his firm's reasoning against developing the building itself. Besides a lack of in-house staff, Davis says he believes the REIT's risk profile also prevented it from taking that approach.
Overall, Davis says he is pleased with the final results at the building, which his company began constructing in 1998. One aspect he is particularly proud of is the mix of tenants, which include FairMarket, MyTeam.com, nCipher and Intelligent Environments. Located eight miles north of Boston, Woburn has previously appealed more to old-line companies such as existing Unicorn Park tenants Gillette and American Airlines.
"It leased significantly ahead of our projections, but the thing we are most happy with is being able to attract a group of knowledge- and technology-based people to the Woburn market," Davis says. "We think it was instrumental in breaking the perception of Woburn as an old economy versus a new economy office market. Now you see major commitments to the area by biotech and high-tech companies, and that really is gratifying."
Tenants include. Davis credits the building's exclusive leasing agent, Trammell Crow, with "doing a super job in identifying tenants for the building and helping to negotiate the transactions." The Trammell Crow team consisted of Brian Hines, Michael Dalton and Mary Fagan.
Prudential Real Estate Investors helped finance the new building. Principal Gary Picone cited the Davis Cos. for its "strategic and creative approach" to developing the property.
"By collaborating with the Davis Cos. on this venture, we were able to realize a substantial return on this investment in a very short period of time," he says.
RREEF is certainly paying a higher price than the estimated $110 per sf it shelled out in 1996 to buy Unicorn Park from the original developer, MetLife Real Estate Investments. The Davis building sold for just under $200 per sf.
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