Two Back Bay office buildings on market for $1.5 billion
Price may lead to one of biggest real estate deals ever in the city
By Dan Adams Globe Correspondent June 04, 2015
Two well-known office and retail buildings along Boylston Street in the Back Bay are on the market for $1.5 billion, probably one of the highest asking prices for commercial space in Boston’s history.
New York-based Blackstone Group LP is preparing to sell the abutting office buildings at 500 Boylston St. and 222 Berkeley St., according to a Boston real estate executive familiar with Blackstone’s offering. Details of the listing were also reported by Bloomberg News and the website Real Estate Alert on Wednesday.
The buildings total about 1.3 million square feet in size. A sale for $1.5 billion would put the price at nearly $1,150 per square foot, far higher than the selling prices of other commercial properties in Boston’s key business districts, which rarely top $700 per square foot.
“I don’t think any office building in the city has gone for that kind of money, and if they can get it, it shows how strong the market is,” said Larry DiCara , a veteran real estate lawyer at Nixon Peabody International LLP. “This is more comparable to a Midtown New York City building than a Boston building, in terms of the price point.”
A spokeswoman for Blackstone, the country’s biggest private equity investor in real estate, declined to comment.
The listings come at a time of tremendous growth in Boston’s real estate market, with new towers and construction cranes dotting the skyline, and several super-size complexes under development or in planning.
Vacancy rates in Boston and Cambridge office buildings remain low, and rents in prime properties are climbing. A number of large US and international investors have also begun snapping up properties in Boston, contributing to a favorable climate for sellers.
The Back Bay buildings are owned by a Blackstone subsidiary, Equity Office Properties, and share an underground parking garage. They are near the Public Garden, the Orange Line and commuter rail trains at Back Bay Station, and dozens of high-end retail shops.
DiCara said the prime location makes buying the properties a sound investment — even if, as some fear, the current hot market is nearing its peak.
“It’s a great site,” he said. “You have transit access, you have retail, and within a five-minute walk there’s almost every amenity you could possibly want. These were top-notch buildings the day they opened, and they’ve never really had a bad year since. There’s always going to be value there.”
In March, Equity Office announced plans to fill the marble courtyard of 500 Boylston with a five-story, 80,000-square-foot addition containing offices and retail shops. It is uncertain whether a new owner would pursue that project.
The buildings were developed in the late 1980s, originally intended to be matching towers designed by the famed architect Philip Johnson. But Johnson’s design for 500 Boylston, which was constructed in 1989, proved unpopular with critics and neighbors, so the 222 Berkeley job was handed to Robert A.M. Stern Architects. Construction on the Stern building was completed in 1991.
Blackstone purchased Equity Office Properties Trust for $39 billion in 2007. At the time, Equity Office owned some 580 buildings, including approximately 12 million square feet of office space around Boston. Since then, Blackstone has steadily sold off buildings from Equity Office’s portfolio and has said it expects to unload the remaining buildings this year. The company’s global head of real estate recently said investors who financed the 2007 Equity Office deal would triple their money.
In May 2014, Blackstone sold five Boston-area office buildings for $2.1 billion to Oxford Properties Group, an investment manager for the government of Ontario in Canada.
Other Blackstone buildings in Boston have been sold to Shorenstein Properties of New York and San Francisco and to a joint venture of Rockefeller Group and Mitsubishi Estate Co. Shorenstein purchased 1-3 Center Plaza; Rockefeller and Mitsubishi bought 28 State St.
Blackstone has also sold Wellesley Office Park, New England Executive Park, and other buildings in Newton, Burlington, and Cambridge.
Dan Adams can be reached
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