Financial terms of the deal were not disclosed. The six-story building is fully leased to Harvard University which occupies 55,065 sf, or 56% of the building; EMI Group, a UK-based music producer and distributor, which leases 23% of the building; and, the Limited, Inc., an apparel retailer, which leases 17% of the building. While Harvard has a long-term lease on the space, both EMI and the Limited have shorter terms on their leases. David Steinwedell, chief investment officer with Wells Real Estate Funds, tells GlobeSt.com that the space will present an opportunity within three to four years but he notes that retail space is in demand in this area.
"Historically, the Harvard Square/Massachusetts Avenue market has outperformed both the greater Boston and Cambridge submarkets in terms of occupancy and rental rate growth. Its geographic location is one of the most recognized addresses in the world," says Steinwedell.
Steinwedell points out that the two buildings fit together well as they are located within a block of each other and both have Harvard as a main tenant. The Massachusetts Avenue building was a sale/leaseback deal with Fleet Bank. Fleet leases approximately 25% of the building while Harvard occupies the rest. "There is fantastic credit in both buildings," says Steinwedell.
The acquisitions were part of the firm's strategic plan to enter the Cambridge market, a market that Steinwedell notes is a difficult one to break into. "Properties don't come up that often," he says. "People want to be there, close to Harvard [University], and blocks of office space this size are nearly impossible to get."
According to Spaulding & Slye Colliers' most recent statistics, the availability rate for the Cambridge market is 25%, but the rate in the Harvard Square/Massachusetts Avenue area is only 11%. In contrast, the city's Alewife Station area has an availability rate of nearly 28% while its East Cambridge neighborhood has an availability rate of 25%. The average asking rent for office space in the Harvard Square area is about $27 per sf.
Wells owns two other properties in the Greater Boston area--a building in Boxborough and a building in Quincy. Steinwedell says the firm current strategy is geographic diversification and its target is the financial district in Boston. "We like the long-term dynamics of Boston," he says. Steinwedell adds that the firm is not ruling out another purchase in the suburbs, noting, "it depends where the opportunities arise." The current office vacancies in that area make long term leases crucial to any deal and, he emphasizes, the "quality of the tenant is key."
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