PDF - The Mount Vernon Company

If you don't see images, click here to view
Story Ideas . Events
To ensure delivery, please add new sletter@bisnow .com to your address book, learn how
January 22, 2013
Boston Kaboom
The Seaport may be the hot new submarket, but Cambridge has a
3.3M SF development pipeline and the Financial District is undergoing
historic transformation, Colliers partners told 1,000 industry pros at the
South Boston Convention Center late last week during its 34th Annual
Trends Seminar and cocktail fete. (The cocktails taste so much better
when the trends are positive.)
Colliers' Cambridge maven Joe Flaherty says landlords are benefiting
from a biotech-fueled building boom around Kendall and Central
squares that includes eight build-to-suits with 1.8M SF under
construction and another 460k SF in the pipeline. The key projects:
Forest City signed an LOI with Millennium Pharmaceuticals to take 300
Mass Ave and is now permitting; MIT secured all permits for 610 Main
St; and Alexandria has two lab buildings ready to go on Binney Street.
HYM is building luxury apartments at 20 Child St in North Point, and
MIT plans to redevelop Kendall Square with more housing, retail, and
1M SF of lab/offices embedded on its campus.
The Colliers team: Ted Chryssicas, Lisa Campoli, co-chairman Tom
Hynes, keynote speaker EOP CEO Tom August, co-chairman Kevin
Phelan, Jim Elcock, and prez Ron Perry. In the regional economy,
healthcare, and education are outstripping financial services as top
employers. Filling the Seaport District are dozens of startups, from
Acetylon to Z mags. (And when startups come into town, coffee shops
and cupcake bakeries are never far behind.) The Financial District
rebounded to drive net office absorption to 1.8M SF, the best in the
nation. Pivotal to the resurgence are Brown Brothers Harriman's 400k
SF lease at 50 Post Office Sqand the plan to develop the $615M,
mixed-use Millennium Tower in Downtown Crossing. Rents are up, and
vacancy is down and forecast to hit 10.2% in '15.
Boston Multifamily Summit - Part Deux
Our panel last Wednesday included Winn Development prez Larry
Curtis, Walker & Dunlop SVP Andrew Gnazzo, and moderator
Bingham McCutchen partner Rich Toelke (whose firm was an event
sponsor). Not pictured: CBRE NE partner Simon Butler, Mt Vernon Co
chairman Bruce Percelay, and The Hamilton Co CEO Harold Brown.
The multifamily boom that's put Boston on just about everyone's radar
(rising rents, falling vacancies, and low interest rates) is likely to last
another two to five years. But the abundance of luxury housing in
development, loosening underwriting criteria, and high acquisition costs
may blow some clouds into this otherwise sunny scenario, our experts
said.
We snapped TIAA CREF's Sam Flood with Simon, who last year sold
more than $900M in multifamily properties. (Now you know who to go to
run your yard sale.) A change Simon's noticing: location is more
important in determining cap rates. Downtown can go for a 4% cap
rate; the 'burbs, mid-4%; and Boston value-add, high 4% to 5%. What
really shocked Simon and his partner Biria St. John is that they
traded a property in Exeter, NH for a mid-5% cap rate that in a cooler
market would have gone for 6%. The 'burbs, far from being dead, hold
some of the better acquisition opportunities. For prospective buyers
wondering how to rise above the crowd, Simon's tips: show a certainty
to close, move quickly, put money at risk, and perform thorough due
diligence.
Andrew's office (an event sponsor) did $700M in multifamily loans here
last year and he expects to do more this year. The sources of debt
cover the field: Fannie, Freddie, HUD, life companies, CMBS, and
bridge loans. For high-leverage loans—70% LTV—he says Fannie,
Freddie, and HUD are good sources. For less leverage, the life
companies are a place to go and occasionally even they will hit 70%
LTV.
The region's largest private multifamily investor, Harold (with wife
Maura), has invested nearly $300M in acquisitions and development
since '10 and is looking for more to buy. His observation about micro
apartments—a 350SF unit intended to lease for $1,700 ($5/SF)—is
that developers won't see much gain because the big expense in any
apartment is the kitchen and bathroom. He's not a fan of CMBS, he
says; when a borrower has a problem they don't know who owns the
debt. He expects the bull market to run for another two to five years
and says that demand for reasonably priced housing always outstrips
supply. Warning: don't overpay and remember, for every up cycle,
there's a down cycle. (Another poignant life lesson learned from early
days on the see-saw.)
Bruce, who's developing or renovating 550 apartments in Allston, says
there's a risk in building too much luxury housing downtown. He
says that in the last two years, construction costs have risen 20%, and
lenders are getting "intoxicated again." In recent years, he reoriented
Mt Vernon from a buyer to a developer. He's focusing on Allston
because rents are lower than downtown, yet the neighborhood is only
about one mile away (shorter if you can hang glide), and a development
surge is on the way. With Harvard and New Balance planning big
projects in the area, he says, Allston will be the new Beacon Hill.
Larry says Winn is always looking for new ways to develop housing for
working people; families that earn less than $100k/year. The
company does about 10 developments per year and has worked in 23
states doing acquisitions, new development, historic rehabs, and
military housing. Winn multifamily projects are often 80% market rate
and 20% affordable units. He finds "significant advantages" in
borrowing from HUD for affordable housing given the pre-payment
opportunities. On micro units, he says, most people would prefer 1,000
SF as opposed to 350 SF (except for sardines and people who like to
get too close when they talk). Winn tries to do macro, rather than
micro units, he says.
AEI Consultants' Stephen Graham, here with Tim Woodward and
Peter McGlew, tells us that last fall, the privately held company
opened its downtown Boston office, giving the San Fran-based firm 19
locations around the country. Two weeks ago, AEI (also an event
sponsor) announced its transition into an employee-owned firm through
an ESOP. The change is designed to provide company ownership to
those who helped build AEI and to help recruit, motivate, and retain
employees. AEI consults on: ASTM Phases I and II, property condition
assessments, environmental site assessments, asbestos and mold
investigations/abatements and sub-surface remediation for multifamily,
shopping center, office, and other real estate clients.
Hey, can anyone tell us the answer to the Yang-Mills existence and
mass gap problem? We need it for a school project. Please send ideas
and news to Susan Diesenhouse, [email protected]
CONTACT EDITORIAL
CONTACT ADVERTISING
CONTACT GENERAL INFO
This new sletter is a journalistic new s source w hich accepts no payment for featured interview s. It is supported by conventional advertisers clearly
identified in the right hand column. You have been selected to receive it either through prior contact or professional association. If you have received it in
error, please accept our apologies and unsubscribe at bottom of the new sletter. © 2012, Bisnow on Business, Inc., 1817 M St., NW, Washington, DC
20036. All rights reserved.
Subscribe