05/08/2013

Blackstone Taps Winner of Big Mass. Complex

A joint venture between Charles River Realty and National Development has won a bidding contest among high-yield investors for a large office park in suburban Boston.

The team offered seller Blackstone about $215 million for the 1 million-square-foot New England Executive Park, in Burlington, Mass. The initial annual yield is 5.8%, but the partnership plans to boost its return by adding retail space and a hotel.

The other bidders included Clarion Partners of New York, Davis Cos. of Boston, RJ Kelly Co. of Burlington, Rockpoint Group of Boston and Walton Street Capital of Chicago.

Cushman & Wakefield is advising Blackstone, which acquired the complex via its 2007 takeover of Equity Office Properties of Chicago.

Charles River and National Development are affiliated investment firms based in Newton Lower Falls, Mass. National Development co-founded Charles River in 2006 with Brian Kavoogian, a former executive of Davis and HFF.

The 10-building complex, which is 86% leased, is on a 49-acre site that can accommodate another 750,000 sf. The Charles River partnership plans to improve the existing buildings and reposition the property as a pedestrian-friendly complex by adding restaurants, stores, a health club and a hotel. The landscaping will also be upgraded.

The existing tenants include BAE Systems, Charles River Systems, Decision Resources and federal agencies. The weighted average remaining lease term is almost six years.

The complex is in a prime location off Route 128 and Interstate 95, about 10 miles from Boston.

Charles River is currently investing via its $250 million Charles River Realty Fund 2, which is shooting for a 14-16% return by acquiring, recapitalizing, developing and redeveloping properties across New England, with an emphasis on metropolitan Boston.

Blackstone has been actively selling suburban-Boston properties from the Equity Office portfolio, driving up sales in the area. In March, the fund shop sold the 508,000-sf Riverside Center in Newton to Houston-based Hines for $197.2 million. HFF was the broker.

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