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Two Class B office buildings totaling ~150,000 ft2 in Boston just sold for $4.1M, when in 2016 they had previously sold for $16M https://archive.ph/AADPP https:

by MrFoof 3y ago

Two Class B office buildings totaling ~150,000 ft2 in Boston just sold for $4.1M, when in 2016 they had previously sold for $16M https://archive.ph/AADPP https://archive.ph/AADPP. Here's the location: https://maps.app.goo.gl/ezkNUEPAVCJJ2rps8 https://maps.app.goo.gl/ezkNUEPAVCJJ2rps8 Things to note: * Within HALF A BLOCK of Boston Common * Within one-to-two short blocks of THREE subway stations serving THREE of the four subway lines * A Dunkin' Donuts 30 seconds away on foot, with multiple other cafes within a block. So prime transit location for workers. However the occupancy of the building has been crud for a long while (hence being sold), and hence why it went for nearly 75% off in the auction. And before anyone goes, "but what about the condition", take a look for yourself (https://i.imgur.com/rubVC88.jpg https://i.imgur.com/rubVC88.jpg not all photos are the building). It's certainly not bad! No, it's not like a top-end Class A skyscraper such as 101 Huntington or 200 Clarendon (or newer stuff I've not been in), but it's far from garbage! It certainly appears to be Class B space, and I say that as someone who actually built out offices (as an employee, not an architect) for two companies about 10-15 years ago! The sale price works out to just $27.33/ft2. The monthly rent for Class B in 2022 was $32-38/ft2. So these just sold for the (EDIT) one year's rent of Class C space. Yikes! Someone took a bath! ------ There's no office demand. Period. Boston has no shortage of vacant office space right now either, and even the buyers of these two buildings are looking to repurpose them.

mistrial9 3y ago
great market info and very relevant comp to SF in so many ways; especially enjoy the implication that yes, long-term capital holders do in fact measure value by "the distance to the donut shop."
- MrFoof 3y ago
  Dunks is a New England institution with a pretty fanatical following, at least for the coffee. To put things into perspective, until very recently, the Back Bay subway and commuter rail station had TWO Dunkin' Donuts inside the station, within ~100 feet of each other, one on each side of the platform (on the floor above the platforms). One was smaller than the other, but you could literally hit someone in the other line with a thrown donut they were that close.
  - astrange 3y ago
    SF also used to have two Starbucks across the street from each other near Moscone. But really, isn't that just one shop that happens to have a railway running through it?
    - MrFoof 3y ago
      They were actually owned by different franchisees! The spaces were significantly different as well. The one that shut down was so small it couldn't even physically accommodate the equipment to make the sandwiches!
      - extragood 3y ago
        I'm sure there are valid reasons for doing that, but whenever I see multiple franchises within spitting distance of one another, I can't help but be reminded of Gob Bluth's "market research" for a 2nd banana stand in Arrested Development: > Did you know that more frozen bananas are sold right here on this boardwalk than anywhere in the OC? And of course he goes on to cannibalize the family's original business.
quickthrowman 3y ago
> The monthly rent for Class B in 2022 was $32-38/ft2. That is not the monthly lease rate. All commercial property lease rates are quoted as dollars per square foot per year.
- MrFoof 3y ago
  You are correct, my bad! Updated my post.
  - quickthrowman 3y ago
    Based on this tenant space listing [0] the building appears to have around 40k sq ft of leasable space. That works out to around 3.25 years of rent assuming 40k sq ft leasable at $32/sq ft. It’s definitely not a good sign for commercial office space, that’s for sure. US 30 year bonds are yielding 5%, that’s much more attractive than a half-leased Class B office tower with an 8% mortgage right now. [0] https://bradvisors.com/wp-content/uploads/2019/04/33-41WestSt_Brochure040419_lo-.pdf https://bradvisors.com/wp-content/uploads/2019/04/33-41WestS... P.S. Sorry about the nitpicking :)
    - toomuchtodo 3y ago
      Consider that a lot of these mortgages are not yet at 8%. There is about $1.5T in commercial debt coming due before 2025. https://archive.ph/ku9Xr https://archive.ph/ku9Xr | https://www.bloomberg.com/news/articles/2023-04-08/a-1-5-trillion-wall-of-debt-is-looming-for-us-commercial-properties https://www.bloomberg.com/news/articles/2023-04-08/a-1-5-tri...
      - quickthrowman 3y ago
        My comment about 5% 30 year Treasury bonds being more attractive than mid tier office buildings financed at 8% was referring to someone making a current investment decision. The refinancing of $1.5T in CRE before 2025 is going to be a bloodbath for regional banks, hopefully we don’t have multiple SVB situations as a result. For anyone unfamiliar with CRE financing, a typical loan might have a term of 5-10 years and an amortization schedule of 20-30 years. A lot of loans that were taken out when the prime rate was 0-2% are now going to have to be refinanced when the prime rate is 5.25% and occupancy rates have dropped, meaning the building is worth less than it was previously and also the monthly payments are higher as a result of the higher interest rates. Lots of building owners are going to walk away and the banks will have to repossess and resell a bunch of CRE.
francisofascii 3y ago
Downtown Boston hotel prices always seem to be insanely high, like higher than NYC and way higher than SF. I don't understand why. Too bad they can't covert easily.

by MrFoof 3y ago

mistrial9 3y ago

great market info and very relevant comp to SF in so many ways; especially enjoy the implication that yes, long-term capital holders do in fact measure value by "the distance to the donut shop."

MrFoof 3y ago
Dunks is a New England institution with a pretty fanatical following, at least for the coffee. To put things into perspective, until very recently, the Back Bay subway and commuter rail station had TWO Dunkin' Donuts inside the station, within ~100 feet of each other, one on each side of the platform (on the floor above the platforms). One was smaller than the other, but you could literally hit someone in the other line with a thrown donut they were that close.
- astrange 3y ago
  SF also used to have two Starbucks across the street from each other near Moscone. But really, isn't that just one shop that happens to have a railway running through it?
  - MrFoof 3y ago
    They were actually owned by different franchisees! The spaces were significantly different as well. The one that shut down was so small it couldn't even physically accommodate the equipment to make the sandwiches!
    - extragood 3y ago
      I'm sure there are valid reasons for doing that, but whenever I see multiple franchises within spitting distance of one another, I can't help but be reminded of Gob Bluth's "market research" for a 2nd banana stand in Arrested Development: > Did you know that more frozen bananas are sold right here on this boardwalk than anywhere in the OC? And of course he goes on to cannibalize the family's original business.

quickthrowman 3y ago

> The monthly rent for Class B in 2022 was $32-38/ft2. That is not the monthly lease rate. All commercial property lease rates are quoted as dollars per square foot per year.

MrFoof 3y ago
You are correct, my bad! Updated my post.
- quickthrowman 3y ago
  Based on this tenant space listing [0] the building appears to have around 40k sq ft of leasable space. That works out to around 3.25 years of rent assuming 40k sq ft leasable at $32/sq ft. It’s definitely not a good sign for commercial office space, that’s for sure. US 30 year bonds are yielding 5%, that’s much more attractive than a half-leased Class B office tower with an 8% mortgage right now. [0] https://bradvisors.com/wp-content/uploads/2019/04/33-41WestSt_Brochure040419_lo-.pdf https://bradvisors.com/wp-content/uploads/2019/04/33-41WestS... P.S. Sorry about the nitpicking :)
  - toomuchtodo 3y ago
    Consider that a lot of these mortgages are not yet at 8%. There is about $1.5T in commercial debt coming due before 2025. https://archive.ph/ku9Xr https://archive.ph/ku9Xr | https://www.bloomberg.com/news/articles/2023-04-08/a-1-5-trillion-wall-of-debt-is-looming-for-us-commercial-properties https://www.bloomberg.com/news/articles/2023-04-08/a-1-5-tri...
    - quickthrowman 3y ago
      My comment about 5% 30 year Treasury bonds being more attractive than mid tier office buildings financed at 8% was referring to someone making a current investment decision. The refinancing of $1.5T in CRE before 2025 is going to be a bloodbath for regional banks, hopefully we don’t have multiple SVB situations as a result. For anyone unfamiliar with CRE financing, a typical loan might have a term of 5-10 years and an amortization schedule of 20-30 years. A lot of loans that were taken out when the prime rate was 0-2% are now going to have to be refinanced when the prime rate is 5.25% and occupancy rates have dropped, meaning the building is worth less than it was previously and also the monthly payments are higher as a result of the higher interest rates. Lots of building owners are going to walk away and the banks will have to repossess and resell a bunch of CRE.

francisofascii 3y ago

Downtown Boston hotel prices always seem to be insanely high, like higher than NYC and way higher than SF. I don't understand why. Too bad they can't covert easily.