Industrial REITS Move Higher As Boston Properties Markets Its Properties And Buys The Hancock Tower

I … Industrial REITS, such as  First Industrial Realty Trust, FR, moved higher as Boston Properties markets its properties and buys The Hancock Tower.

II … Eliot Brown of The Wall Street Journal reports in article Beacon Partners To Sell KeyAsset In 20 Property Deal   

Beacon Capital Partners is planning to sell its most valuable asset in a 20-property portfolio of office buildings in Washington, D.C. and Seattle, a move that follows a recent modification of a $2.7 billion loan that urges the company to sell assets.

The Boston-based firm expects to start marketing the 678,000-square-foot Market Square property in January, a person familiar with the company’s plans said. The decision comes as an agreement reached earlier this month between Beacon and lenders on the loan encourages the company to shed properties to pay down debt, according to a summary of the modification terms provided to investors.

The two-building property north of the national mall has been among the best performing in Beacon’s 10 million square foot portfolio, which the firm picked up from Blackstone at the market’s crest in 2007.

While many other buildings have seen income stay flat or fall, Market Square’s increased by more than $3 million to $26 million between 2007 and 2009, according to the real-estate research firm Trepp.

The loan modification reached earlier this month with special servicer C-III Asset Management came as the portfolio was barely generating enough cash to cover debt payments. The servicer, acting on behalf of the investors in the mortgage, which was converted into commercial mortgage backed securities, gave Beacon a five-year extension on the loan’s maturity to 2017 and agreed to temporarily lower interest payments. Office buildings at Reston Town Center in Reston, Va., part of the portfolio of real estate that Beacon Partners recently reworked with lenders. In turn, the terms push Beacon to pay down debt by at least $900 million through sales or refinancings. The summary presented to investors says the firm “shall begin a series of individual asset sales in order to commence the deleveraging of the loan in advance of its original maturity date.” Beacon is not required to sell specific buildings, but the modification’s structure puts strong pressure on the firm to sell Market Square by giving Beacon a lower interest rate on the portfolio’s debt if that specific property is sold by June 30. Based on a high occupancy and strong demand in the Washington, D.C. market, the property could potentially sell for about $450 million, according to Julia Tcherkassova, an analyst at Barclays Capital, making it likely the most valuable property in the portfolio. The building also has $132 million of non-CMBS debt, she says. “It definitely makes sense to sell it,” she says.

III … Vittorio Hernandezof AHN News reports Boston Properties purchased the landmark John Hancock Tower for $930 million. The 62-floor glass skyscraper, located at the city’s Back Bay, was one of the first prized buildings to flounder when the property boom ended in 2008.

The edifice was initially purchased at a foreclosure auction 18 months ago by Normandy Real Estate Partners and Five Mile Capital Partners for $660.6 million. That was about 50 percent off the building’s price in 2006.

Boston Properties paid Normandy and Five Mile $289.5 million cash and assumed $640.5 million in debt.

A founding partner at Normandy’s described the resale of the Hancock tower as a combination of real estate genius and capital power.

Real estate experts said the deal indicates the growing optimism in the industry as commercial buildings begin to recover their value and investors seek good buys that will provide an equally good cash flow.

The Hancock Tower, built in 1975 and with 1.7 million square feet of space, is considered a benchmark of the boom and bust cycles of the real estate industry.

Months prior to the merger of John Hancock and Manulife Financial of Canada, the former sold the tower and three other properties in 2003 for $926.8 million to Beacon Capital Partners.