By Joe Clements | Nov. 3, 2019
Cambridge — A fast-tracked Davis Cos. upgrade of 625 Mount Auburn St. near Harvard Square has culminated in a $57.5 million sale of the first-class, 137,400-sf office building to North Colony Asset Management and Paradigm Properties with $35 million in financing provided from Jackson National Life Insurance Co. JLL Capital Markets orchestrated the exchange after a bidding process described as “hotly contested” by one industry observer, the campaign attracting private capital and institutional investors, including well-heeled pension funds drawn to a core-level opportunity created by Davis Cos. barely 24 months after its purchase.
“It’s a good day for them,” the CRE source spoken to says regarding completion of the value-add endeavor Davis Cos. embarked on in August 2017 following its $45 million purchase of the low-level complex set on three acres across from Mount Auburn Cemetery. It is where major bus lines run to Harvard Square from Belmont and Watertown at the convergence of three key residential communities, that element seen contributing to the interest in 625 Mount Auburn St. while another factor cited is expansion of the Cambridge commercial footprint down Mount Auburn Street to Watertown Square.
The building bought by North Colony and Paradigm is at about 97 percent occupied, roughly the same rate as when the property was first acquired, the difference in value seen in a capital improvements program that enticed anchor tenants Charles River Analytics and Mount Auburn Hospital to renew at a rate reflecting the market shift upward since their deals were first signed, the trend a result of Boston and Cambridge experiencing a flood of demand from lab and office tenants this decade. At the time Davis Cos. bought 625 Mount Auburn St., the average in-place rent for the tenant roster was $30.31 per sf, or 32 percent below the submarket average.
Reached by phone, Davis Cos. asset manager and principal Cappy Daume declined to discuss terms of the renewals to anchor CRA (80,000 sf) and Mount Auburn Hospital (20,000 sf) negotiated in-house or additional space filled through leasing expert David Fitzgerald, but she concurs the signings did result in a property brimming with stability well into the next decade. “It went pretty fast,” she concurs. “It was like, boom, boom, we’re done.”
On recognizing 625 Mount Auburn St.’s potential upside, Daume says Davis Cos. was less clairvoyant about the sudden uptick in development activity—“I don’t think anyone could have expected what has happened there recently,” she observes—but explains the homegrown firm deemed the property that dates to 1961 had been well-maintained under then-owner KBS Advisor’s stewardship and also understood the infill property’s inherent strengths.
“It was a location we were familiar with and comfortable with, and we also recognized the stickiness of the tenants to the building,” Daume recounts as to her firm making the plunge in summer 2017 after KBS hired HFF Capital Markets to find a taker, the brokerage group led by Coleman Benedict, Christopher Phaneuf, Kerry Hawkins and Benjamin Sayles the same team now at JLL retained this spring by Davis Cos. to harvest the building, in the latest instance joined by JLL colleague Matthew Sherry.
While the physical plant was in good condition, Davis Cos. did extensive work improving common areas and tenant spaces of the property, Daume outlines, then worked to find enough common ground to satisfy the tenants without them exploring other options, that effort seen as key in delivering an investment that appealed to a broad audience of Tier One capital.
Calls to Paradigm and the JLL Capital Markets team to discuss the sale which closed late Friday were not returned by press deadline. Paradigm and North Colony are well-known in metropolitan investment circles, with the former launched in the mid-1990s possessing a vast track record featuring product in downtown Boston out to the suburban realm and beyond New England. North Colony was launched three years ago by market veterans Brian Antonellis and Mario J. Valdivia, both alum of Independencia Asset Management, the firm which since 2010 has had considerable success regionally in compiling an office building portfolio eclipsing five million sf fueled by Chilean capital.
Ironically, one of the last acquisitions Antonellis and Valdivia were at Independencia for was 100 Rustcraft Rd., a 422,000-sf suburban flex building secured in September 2016 for $70.0 million in a joint venture with RJ Kelly Co. That development was purchased from a familiar face—the Davis Cos—as first unveiled at the time by Real Reporter.
Key principals at Paradigm include co-founders Jon Caldwell and Kevin J. McCall. Jonathan G. Davis is founding principal of the Davis Cos.