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REA
July 20, 2016  

Tishman Team Puts Boston Tower on Block

A Tishman Speyer partnership is teeing up One Federal Street, a massive Class-A office building in Boston’s Financial District.

The 1.1 million square-foot property is expected to trade for about $750 million, or $682/sf. That would produce an initial annual yield just above 4%, in line with comparable sales in Boston. New York-based Tishman and its partners, which include Abu Dhabi Investment Authority, have awarded the listing to Eastdil Secured.

The 38-story tower is 98% occupied, with a weighted average remaining lease term of almost seven years. The largest tenant, law firm Morgan Lewis, occupies 301,000 sf on a lease that runs until 2023. Records-management company Iron Mountain is leasing 133,000 sf until 2024. Others tenants include Credit Suisse, J.P. Morgan, Oppenheimer & Co. and U.S. Bank.

The property’s occupancy rate had fallen to 66% in 2012 after two major tenants, Bank of America and State Street, vacated their space. The Tishman team then poured in some $30 million for renovations, including the addition of multi-function space and a garden on the roof of a nine-story wing. The lobby, common areas and street-level retail space were revamped, and windows were added to several floors that lacked them because they were previously used as a check-processing center. That made it easier to lease what had been considered undesirable space. The project’s completion coincided with an upturn in Boston’s leasing market.

One Federal Street fills the block bounded by Franklin Street, Devonshire Street and Milk Street. It’s a few blocks south of City Hall, near public transportation, shops, restaurants and hotels. The building is designated LEED gold.

The Tishman team acquired the property in 2006 for $514 million from a partnership between Atlanta-based Jamestown Properties and ING Clarion of New York. In 2010, with the departures of BofA and State Street looming, investors competed to buy up the building’s mezzanine debt with hopes of taking over the building. But the Tishman group acquired some of the junior debt, enabling it to maintain control and stabilize the property.

A sale at the estimated value would be a coup for Tishman, and rank among Boston’s largest single-property trades in recent years.