Fargo Building (Seaport Center)

philip

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From Banker and Tradesman

Partnership Moving Rapidly on Plans for Fargo Building
By Joe Clements

SeaportCenter.jpg


A partnership of the Beal Cos. and Rockpoint Group, which acquired the Fargo Building in South Boston earlier this spring, plans to use the property as a home for office tenants.

Perhaps no Hub commercial property better reflects the notion that ?the more things change, the more they stay the same? than the 96-year-old Fargo Building in South Boston.

The colossal structure at 451 D St., which served as an Army induction facility during World War II, is being marketed to office tenants under a new moniker, Seaport Center. Acquired earlier this spring for $40.5 million by a partnership of the Beal Cos. and Rockpoint Group, the 465,000-square-foot building was converted to Class B office space in the 1980s by developer Harold Brown, but a string of owners had recently touted alternative concepts running from a data center serving the telecommunications industry to hotel, retail and residential uses.

As recently as January, for example, owner Hypo Real Estate Corp. told the Boston Redevelopment Authority it wanted to build 263 condominiums in a proposal that would have grafted 3.5 stories on top of the 9-story building. A subsidiary of German-based HypoVereinsbank, which took over in lieu of foreclosure last year from Yale Investments USA, Hypo abruptly shifted gears, however, putting the property up for sale in a fast-track effort that yielded the agreement with Beal and Rockpoint in barely a month.

Despite having just consummated the deal, the new partnership is moving quickly to put its plan in place. Spaulding & Slye has been hired as exclusive leasing agent and the group is in late negotiations with Jung/Brannen Assoc. of Boston to provide architectural design services. Along with various cosmetic improvements planned for the exterior and landscaping, Jung/Brannen would be available to help tenants design their space in a timely manner, said Beal Cos. Vice President Stephen N. Faber.

?A Real Value Alternative?
The encouraging rebound of Boston?s economy makes Seaport Center ?the right building at the right time? to capture the increasing demand for office space, said Spaulding & Slye Senior Vice President William F. Collins, who is overseeing the leasing program with Spaulding & Slye Managing Director William P. Barrack and Vice President Benjamin Heller. Collins said he is also confident because of the seasoned team now in control. ?They are a savvy group with a keen understanding of what is happening today and [the experience to implement] their plan,? said Collins of Beal/Rockpoint. ?We are very excited to be working with them as part of that effort.?

According to Faber, Hypo initially sought his firm out as a potential partner before opting to divest the asset entirely. That was fine with Beal and Rockpoint, he said, especially given that they had a different vision for the building than Hypo, convinced that introducing a residential piece was not the best approach. Although just one-third of the office space is leased, the torpid tenant response is not as much an indictment of the Fargo Building?s prospects as an office address, said Faber, but rather a lack of proper marketing.

?It was clear as a bell to us that the better choice was to [market Fargo] as office space,? said Faber. ?We think it is a very viable property for that use.?

That view is based on both internal and external attributes of the Fargo Building, said Faber, including large, efficient floor plates exceeding 50,000 square feet and an extensive investment in the property?s common areas and mechanicals by previous ownership. Besides new windows and a grand, 2-story atrium lobby, the investment ? which some estimate was as much as $20 million ? included installation of greater power and modern systems for heating, air conditioning and computer networks. Because Yale had hoped to lure telecommunications tenants, and did so with some success, Faber said the Fargo Building?s age belies its ability to serve new-millennium companies, citing electrical capacity three times that required by most tenants.

?The infrastructure is really in great shape,? said Faber. Having paid a significantly discounted price from the $72 million Yale shelled out in 2000, the building does not need to command top-line rents for the numbers to work, he acknowledged, with the space currently being offered in the mid-$20 per-square-foot range. The surrounding Seaport District has seen a glut of high-end office space constructed in recent years, but Faber indicated that the Class B sector is not as easily served. ?We think it?s a great opportunity for back-office users,? he said of Seaport Center. ?It?s a real value alternative to what else is out there.?

Firms also should be attracted by the substantial on-site parking offered at Seaport Center, said Collins, as well as enhanced public transportation such as the new Silver Line transit way that runs from the inner city through South Station and out to the Seaport District, including a stop adjacent to the Fargo/D Street intersection where the building is located. That route, coupled with the quick access to Logan International Airport and Greater Boston?s highway network as a result of the $15 billion Big Dig project, also should improve the marketability of the building, said Collins.

Indeed, compared to just a decade ago, the landscape surrounding the Fargo Building has undergone incredible changes, underscored by a new 800-room Westin Hotel slated to open this week across the street.. The hotel will anchor the abutting $800 million Boston Convention & Exhibition Center which opened two years ago, a project that further added to the local ambience. That engine and other public investment is fomenting new retail and restaurant offerings in the surrounding area, said Collins. ?It?s a completely different neighborhood,? he said.

Other observers concur with that outlook, including veteran broker Robert Fitzgerald of NAI Hunneman Commercial Co. Fitzgerald, who has been marketing space in the area since the early 1990s, said it has become far easier to convince tenants to consider the Seaport District, which until the Big Dig and other public infrastructure projects was essentially an eastern outpost of the city?s downtown. Now, Fitzgerald maintained, ?It?s easier to get to the Seaport District than to the Financial District.?

A stronger economy has teamed up with the submarket improvements to create healthy tenant interest in the Seaport District, said Fitzgerald, whose firm has leased all but a fraction of 51 Sleeper St. there and is also exclusive leasing agent for the Boston Design Center located a few blocks from Seaport Center. A dearth of large, contiguous blocks of space should also benefit Beal and Rockpoint in their Fargo endeavor, predicted Fitzgerald, who supports the strategy for Seaport Center. ?I do think it?s a very good building for office [tenants],? he said. ?That really is the future there.?

Beal and Rockpoint are certainly hoping such is the case, said Faber, adding the owners are already ?aggressively? pursuing prospective tenants. While the hefty amount of vacant space seems daunting, Faber said his group sees it more as potential upside, especially given evidence that rental rates are finally moving upward. ?We consider ourselves fortunate to be able to buy the building at this point in time,? Faber said.
 
I hate to see a historic building name displaced by something as generic and placeless as "Seaport Center".
 

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