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Beacon Shopping Assets in Third Fund

Boston Firm to Sell 10M-SF Portfolio That Could Pull in $5B
January 19, 2007
Timing, as they say, is everything. Flush with success -- and capital -- from the lucrative divestiture of its second fund, Beacon Capital Partners LLC is stepping up to the plate again -- this time selling the remaining assets of its Beacon Capital Strategic Partners III LP, a portfolio of Class A office assets that could pull in more than $5 billion.

The Boston-based private real estate investment company led by Alan Leventhal has tapped a trio of brokerage firms -- Eastdil Secured, Morgan Stanley and Goldman Sachs -- to market the portfolio, which encompasses about 30 buildings.

Beacon paid a total of more than $3 billion to acquire the properties in various deals between 2003 and 2005, according to CoStar information. The average price per square foot for the assets in the portfolio works out to about $301.80. At the end of September 2006, Beacon valued the nearly 10 million-square-foot portfolio at $3.5 billion.

In today's white-hot market, it's likely to fetch much more.

Beacon sold a 10-property portfolio to Broadway Real Estate Partners late last year for roughly $3.3 billion or $495.54 per square foot. So, based on that deal and other area comparables for the various markets by CoStar, this offering is likely to trade for north of $5 billion. And the talk is that it could go to one buyer, which may sell off some of the assets later.

The portfolio includes properties in the nation's top-performing markets, including Manhattan, Boston, Northern Virginia, Los Angeles, San Francisco and Seattle.

In New York City, Beacon is shopping Park Avenue Atrium at 237 Park Ave. The 1.1 million-square-foot building, which also has an address of 466 Lexington, between 45th and 46th streets, last traded for $455 million or $407.42 per square foot in 2003. Apollo Real Estate Advisors sold the property to a venture between Beacon and Monday Properties. It is fully leased.

That property should be able to pull in more than $720 million, when compared to a similar deal last year that saw 450 Lexington Ave. trade hands last year for $659 per square foot. That price seems downright conservative for a Midtown office tower these days.

Downtown, the fund is selling the 458,848-square-foot office building at 100 Wall St. at the corner of Water St. Beacon acquired the 29-story tower for $134 million or $292.04 per square foot in 2005 from Reckson Associates Realty Corp.

Another highlight of the portfolio is Citicorp Center, a 550,000-square-foot building at 1 Sansome St. in San Francisco that Beacon acquired for $217 million or $394.55 per square foot two years ago.

In Boston, Beacon is selling the 269,000-square-foot office and retail gem at 200 State St. The property, also known as Marketplace Center, last traded hands in 2005 for $141 million or $476.35 per square foot.

The portfolio also includes:

  • Figueroa Plaza, a two-tower property totaling 615,000 square feet at 201 and 221 N Figueroa St. Beacon acquired the two buildings for $133.1 million or $216.38 per square foot in 2004 from Northridge Capital LLC;

  • 116 Huntington Ave., a 268,672-square-foot building in Boston's Back Bay. Beacon acquired the property in 2004 from New Boston Fund Inc. for $77.3 million or $287.71 per square foot;

  • 1000 Wilshire Blvd., a 471,692-square-foot building acquired for $115.4 million or $244.65 per square foot in 2004;

  • Bay Colony Corporate Center, a four-building property along Winter St. in Waltham, MA, which Beacon acquired for $272.5 million or $281.33 per square foot in 2005 from Shorenstein;

  • 50 Beale St., a 641,328-square-foot building in the South Financial District of San Francisco. Beacon acquired it for $150 million or $233.89 per square foot in 2005 from Fremont Sequoia Holdings LP.

  • 100 California St., a 274,000-square-foot building in San Francisco that Beacon acquired for $98.6 million or $360 per square foot in 2005.

  • 120 Howard St., a 142,327-square-foot building in San Francisco acquired last year for $40 million or $281.04 per square foot.

  • 901 5th Ave., a 537,000-square-foot building in Seattle, also known as 900 4th Ave. Beacon acquired the former Bank of California building for $100.8 million or $187.84 per square foot in 2004 from Walton Street Capital LLC. Beacon is developing a 24-story, 126-unit residential condominium tower at 909 Fifth, the portion of the full-block site which used to house the former bank building's drive-through lanes.

The portfolio also includes 14 properties in the Northern Virginia suburbs of Washington, D.C. Beacon acquired an 11-property portfolio for $960 million or $434.16 per square foot from Westfield Realty Inc. in June 2005 in a venture that is believed to include Monday Properties. The buildings, located mostly in the Rosslyn submarket of Arlington, VA, total 2.2 million square feet. The portfolio includes several properties along Wilson Blvd.: 1000, 1101, 1200, 1401, 1501 and 1515 Wilson Blvd.

The fund also owns 1400 Key Blvd., 1701 N Fort Myer Dr. in Arlington and 2990 Telestar Ct. in Merrifield, VA. And Beacon also owns a stake in the two buildings at 2800 and 2900 Crystal Drive, in Crystal City.

The portfolio also includes two properties totaling 505,000 square feet at 8180 and 8200 Greensboro Dr. in the Tysons Corner area of McLean, VA. And Beacon is also shopping One Fair Oaks, a 214,214-square-foot office building at 4114 Legato Rd. in Fairfax, VA. Beacon paid $53.2 million or $248.35 per square foot to acquire the building from Principal Life Insurance Co. in 2004.

The $1 billion closed-end commingled fund three targeted value-added investments and at peak capitalization held 17 investments spanning 11.4 million square feet with a total value of $3.8 billion.

At one point the portfolio included the 1.1 million-square-foot Chicago office tower at 222 S Riverside Plaza, but Beacon sold that property, along with 444 W Jackson Blvd., last year for $277.5 million. Behringer Harvard REIT I Inc. paid $238.65 per square foot for the two properties.

Beacon is in the midst of investing its fourth fund, a $2 billion vehicle with a buying capacity of between $7 billion and $8 billion with leverage. At the end of September, the Fund consisted of 18 investments valued at $6.4 billion, representing about 80% of its total equity. This is the first Beacon vehicle to include international investments, with a property in London and two assets in France.
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