399 Boylston Street, Boston, MA

Location:Back Bay Submarket
Property Type:Office
Square Footage:229,000 sf
Date Acquired:July 2005
Purchase Price:$55,500,000 ($242 psf)
Strategy:Completed $2mm in renovations in order to lease-up of remaining vacant space (18% of building) and upcoming rollover (60% of building)
Date Sold:January 2007
Sold For:$95,800,000 ($418 psf)
Total Investor IRR:In excess of 50%

Project:

In July of 2005, Abbey Road Advisors purchased 399 Boylston Street as a joint venture with Rockwood Capital. Abbey Road Advisors was initially attracted to the investment because of the asset’s quality physical construction, superior finishes and outstanding location in a supply-constrained Back Bay submarket of Boston, MA. The challenge was to lease-up the approximately 41,000 square feet of existing vacancy (18% of the building) and manage the impending rollover of almost 140,000 square feet or 60% of the building.

Investment Strategy:

Abbey Road Advisors’ strategy from the point of purchase was to lease up the existing vacancy as soon as possible and attempt to renew the lead tenant thus eliminating the income risk of potential leasing roll in the future. To help lease-up the existing vacancy and justify higher asking rents, Abbey Road Advisors invested approximately $2,000,000 in building improvements to enhance the building’s appearance and operational efficiency. Simultaneously, Abbey Road Advisors committed to developing a strong personal relationship with the lead tenant, CD IXIS, for the purpose of renewing their roughly 94,000 square feet of space which was scheduled to expire in the following two years. Therefore, Abbey Road Advisors immediately began to develop a working relationship with CDC IXIS based on multiple face-to-face meetings.

Results:

Within a year, Abbey Road Advisors successfully leased up the majority of the vacant space in the building thanks to a fresh leasing approach and the physical improvements to the building achieved through renovations proposed and completed by Abbey Road Advisors. Additionally, Abbey Road Advisors successfully renewed CDC IXIS at a higher than expected rental rate due to CDC IXIS’ satisfaction with the building improvements and their confidence in Abbey Road Advisors as asset managers. Originally, Abbey Road Advisors projected an approximately 20% total IRR return to investors based on a 7-year hold. Due to the changing market conditions and better-than-expected leasing results, Abbey Road Advisors was able to put the asset up for sale in late 2006 after less than two years of ownership and ultimately sold the asset in early 2007 for $418 per square foot. This sale achieved a total investor IRR of approximately 50% which out-performed the expectations at time of acquisition by more than double.