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Conversion to Industrial Condos part of Leggat's Plan in Canton

Banker & Tradesman
May 30, 2005

Leggat McCall Purchases Nine-Building Portfolio; Leasing Also Under Way at Shawmut Industrial Park

Some promise the world. Leggat McCall Properties is offering a little slice of Canton.

As part of its strategy in acquiring nine buildings at the Shawmut Industrial Park in that suburban Boston community, LMP will convert a portion of the 471,000 square feet into condominiums catering to industrial companies and tenants needing high-end flex space. The savvy Boston real estate firm is slated to close the deal for the buildings, which are being purchased from BlackRock Inc., in early June. The transaction, first reported on Banker & Tradesman’s Web site last Thursday, is said to be in the $30 million range.

“We’re excited about it,” LMP Executive Vice President Eric Bacon said last week in acknowledging the agreement. Mostly constructed in the 1980s, the buildings involved are 5, 50, 60, 65, 70, 75, 95, 105 and 110 Shawmut Road. The park itself has 24 buildings, including one which sold last year to user Yale Electric Corp. for $4.1 million.

Bacon would not discuss financial aspects of the pending transaction, but did confirm the company’s plan to carve out condominiums from some of the buildings. While office condominiums have been around Greater Boston for decades, Bacon said he believes the Shawmut units will be unique to the local industrial/flex market, particularly given an emphasis on the upper end of that arena. “I haven’t seen them [industrial condos] in Massachusetts,” he said, explaining the product has been established in such states as Florida and California.

The early response from potential buyers has been encouraging, according to Bacon, even without a marketing program in place. “We’ve had some action,” he said, adding that other buildings in the package will remain available for leasing. Indeed, the new owners have landed a major tenant for all of 5 Shawmut Park even prior to the closing, with a division of GE Capital committing to occupy that 60,000-square-foot structure. Leasing agreements will be among the factors determining which buildings are made into condominiums, said Bacon, as will layout, ease of splitting mechanical systems and other physical considerations.

LMP reportedly will offer units to buyers needing between 3,000 and 20,000 square feet of space, which would seemingly fill a growing niche. Auburndale Realty Corp. principal Robert Nahigian said he has seen considerable ownership interest by users needing 10,000 square feet or less. “There are a lot of them [smaller industrial space users] out there right now, and many are definitely looking to buy,” he said, partly due to low interest rates and a desire for an equity stake. Another veteran suburban broker, Scott Hughes of New Dover Assoc., concurred that companies are pursuing smaller buildings, many of them private operations or firms which have fixed space needs going forward.

Industrious Activity Hughes also agreed that industrial and flex condominiums are uncommon in the Bay State, but said there are efforts afoot to create such product in communities like Bellingham, Hudson, Marlborough and others areas along Interstate 495. Bacon said LMP had envisioned the concept initially and then set out to find an appropriate facility, ultimately selecting the Shawmut Industrial Park. A solid location along Route 128, the quality of the park and on-site management by the Nordblom Co. were among the reasons LMP determined Shawmut was the correct fit, Bacon said, adding that Nordblom will remain on as property manager of the buildings being acquired.

Bacon said a decision has not yet been made on a leasing agent for the portfolio going forward. Cathy Minnerly and J.P. Plunkett of Cushman & Wakefield negotiated the GE Capital lease, while the firm’s investment sales group is also brokering the sale of the nine buildings on behalf of BlackRock Inc. Cushman & Wakefield officials declined comment on the status of the sale or the GE lease. The nine properties were acquired by BlackRock as part of its recent purchase of SSR Realty Inc.

Pricing will be key in determining whether the condominium idea works out, maintained Hughes. Even though vacancies have increased at the park in recent years along with the rest of the industrial market, Hughes said he believes Shawmut Industrial Park will continue to attract tenant interest. “Traditionally, it has been a very good location,” he said.

Adding to the optimism is a jump in industrial activity after a slow 2004, said Hughes, with New Dover having just completed a 5,700-square-foot lease to Pepperidge Farm at 40 Industrial Drive in Canton. Hughes represented the building owner, Ram Management, while Bret O’Brien was the broker for Pepperidge Farm. The property has about 22,000 of its 60,000 square feet still available for lease, according to Hughes.

Along with the steady stream of smaller tenants, requirements of 30,000 to 100,000 square feet have been on the rise, Hughes said, with many of the firms needing as much as 60,000 square feet often interested in actual ownership. That constituency, which typically will pay more for a building than an investor, is helping fuel a surge of interest in industrial buildings, according to Hughes, whose own firm is reportedly being retained to sell a 101,000-square-foot property in Marlborough.

While Hughes would not discuss the matter, sources said New Dover Assoc. will offer 100 Locke Drive for sale on behalf the owner, a private family trust. The industrial/flex building was constructed in three phases between 1979 and 1988. Also in Marlborough, the owners of 377 Simarano Drive reportedly have decided to trade that 160,000-square-foot industrial facility in the capital-laden environment. Sources claimed Cushman & Wakefield has been selected for that assignment, but company officials were unavailable by press deadline to confirm whether that is the case. It is also unclear what the asking price might be for the building, which was purchased by USA Marlborough Corp. for $21.7 million in 1999.

Hughes said he was unsure of the status of 377 Simarno Drive, but said there has been substantial tenant interest at the nearby 445 Simarano Drive, which Ram Management also acquired earlier this year, paying $6.6 million in January. As listing agent of the latter building, Hughes said requirements needing 100,000 square feet or less have been particularly active. The 175,000-square-foot property is undergoing a substantial renovation, with occupancy slated for October.

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