Options Trouble 180,000-SF Microsoft Lease

CAMBRIDGE, MA-In a development one observer terms “a landlord’s worst nightmare,” a 180,000-sf office lease to Microsoft Corp. has been disrupted by an option held on space rented to existing tenant PA Consulting Group. The unforeseen snag could influence Microsoft’s high-profile deal, according to sources tracking the imbroglio at One Memorial Dr. The 17-story, 533,000-sf tower is owned by the Blackstone Group through its real estate company, Equity Office Properties.

“Someone screwed up big time,” one source maintains in estimating to GlobeSt.com that the faux pas could amount to “a $100-million mistake” given the length and terms of the lease, which reportedly escalates to a near-record rate for Cambridge of $72 per sf. When signed earlier this summer, the agreement was hailed as a landmark deal for the building and the market. Microsoft was expected to move close to 1,000 employees to One Memorial Dr. during a three-part lease up slated to begin next month.

When contacted by GlobeSt.com, EOP had no comment beyond stressing that work is proceeding on the first piece of Microsoft’s relocation, while an official at PA Consulting says she is unaware of any dispute. A Microsoft spokesman declined to say whether its lease would be impacted, only offering that, “since this is a private dispute to which we are not a party, we have no comment.”