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Hancock Tower Sells for $910M

Beacon Capital Bests Other Bidders for Back Bay Trophy Tower, Plus Two Other Buildings
March 14, 2003
Boston-based Beacon Capital Partners agreed to buy the 62-story headquarters of John Hancock Financial Services and two other buildings in downtown Boston from the financial services firm for $910 million or about $338 per square foot, bringing a conclusion to one of the more hotly contested bidding wars in the city's history.

In addition to the trophy John Hancock Tower building at 200 Clarendon Street, the sale of Hancock's three-building home office complex includes 197 Clarendon Street and 200 Berkeley for a total of 2.7 million square feet of rentable Class-A space in Boston's high-profile Back Bay sub-market.

"With this agreement with Beacon Capital Partners, we achieve two key goals," said John Hancock Chairman and CEO David F. D'Alessandro. "First, we unlock a substantial amount of capital that will be redeployed in ways that strengthen the company and create value for our stakeholders. Second, the long-term lease we've signed keeps our corporate headquarters here in Boston and demonstrates our commitment to remain a robust and active corporate citizen in this community."

Hancock said it will generate a pre-tax gain of about $570 million from the sale, including $160 million to $170 million in after-tax capital gain this year, and the remaining value amortized over the term of the lease. Under the terms of the agreement, Hancock will retain the right to lease its current space for the next 10 to 15 years depending on the specific building, with market extension options for up to an additional 25 years.

The financial services firm put its headquarters up for sale last year after seeing investors pay record sums for trophy office properties in major U.S. CBD locations. Among those reported to be in the running for the Hancock buildings was Chicago-based Equity Office Properties Trust (NYSE: EOP).

Equity Office originally entered the Boston office market by acquiring the portfolio of Beacon Properties Corp. for $3.9 billion in 1997. That firm was headed by Alan Leventhal, who subsequently formed the privately held Beacon Capital Corp. in January 1998. Based in Boston with a regional office in Los Angeles, the company has a commercial property portfolio of approximately 7 million square feet.

With the Hancock purchase, Beacon Capital is establishing quite a track record as a buyer of Boston trophy buildings. In December 2002, Beacon Capital bought 501 Boylston Street from MetLife in another sale-leaseback transaction.

Built in 1974, the landmark John Hancock Tower totals 1,589,533 square feet. The smaller 200 Berkeley stands 26 stories with 651,000 square feet and 197 Clarendon is eight stories and 448,796 square feet.
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