REIT buys 2nd building near harbor Boston Properties pays $61 million for Candler Building

It sold for $22 million in '96

Buyer also bought 'trophy' building at 100 E. Pratt St.

July 23, 1998|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

A Boston real estate investment trust snapped up the Candler Building yesterday for roughly $61 million, its second major downtown office purchase in the past year.

Boston Properties Inc.'s acquisition of the 12-story office tower at 111 Market Place marks the latest in a series of signs of renewed interest in the city's commercial real estate market.

The purchase of the Candler Building, a former Coca-Cola Co. warehouse, fits with Boston Properties' strategy of dominating local markets through multiple holdings, analysts said.

"They're looking to establish critical mass in particular markets, and they're especially looking for properties in downtown areas where there are barriers to entry for others," said Gary Boston, a PaineWebber Inc. analyst who tracks the REIT.

"While they've bought a lot of trophy-type properties, they're also searching for bread-and-butter properties [such as Candler] that afford some synergy."

Boston Properties' local "trophy" purchase came in October, when it spent a Baltimore record $137 million to acquire a 28-story high-rise at 100 E. Pratt St., one of the city's best office locations.

With Candler, Boston Properties -- controlled by U.S. News & World Report publisher Mortimer Zuckerman -- owns 1.1 million square feet of Baltimore office space, making it one of the downtown's largest property owners.

Although the company acknowledged the purchase of the 535,000-square-foot building yesterday, it declined to provide further details, citing Securities & Exchange Commission regulations.

Sources familiar with the transaction said the building's price was roughly $110 per square foot, or about $61 million.

For the

Meridian Group Inc., the Washington investment company that bought Candler for $22 million two years ago, the sale is a generous payoff on a tremendous gamble.

"Our belief is that the best time to sell a building is when it's stabilized, and that's what we were able to do with Candler," said Bruce S. Lane, a Meridian partner and executive vice president.

When Meridian bought Candler from an affiliate of General Electric Co., the building was 35 percent vacant, had a history of losing large tenants and suffered from being in a moribund neighborhood.

Today, as plans for the nearby city Children's Museum advance and with the Power Plant packed nightly, the 87-year-old Candler Building is 95 percent leased.

Occupants include Baltimore Gas and Electric Co. subsidiary Constellation Power Source, Sierra Military Health Services Inc. and the Johns Hopkins School of Hygiene and Public Health.

Though the resurgence of the city's white-collar economy and a lack of construction are credited with helping Candler's fortunes, at least part of the building's turnaround can be attributed to the shift of downtown's central business district toward the Inner Harbor.

"There's no question that the building's Pratt Street location, and the differentiation between harbor properties and those off the harbor, stimulated interest in the sale," said Dennis P. Malone, a partner with Colliers Pinkard, the local commercial real estate firm that Meridian hired in January to sell Candler.

"Two years ago, there were only one or two buyers willing to bid more than $20 million for Candler," Malone said. "Meridian deserves a lot of credit for turning the building around and creating value."

Pub Date: 7/23/98

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