BUY STARTS FAIRLANE INVESTMENT PLAN
GlobeSt.com Commercial Real Estate News and Property Resource
July 12, 2007
By Joe Clements
NEWTON, MA-After assembling, revamping and divesting a 300,000-sf
portfolio of class B office buildings in Boston over the past decade,
local investment group Fairlane Properties, Inc. is back on the
prowl for product, as evidenced by the $7-million purchase of an
80,000-sf office/flex building in this inner-suburban community.
President Michael Grill tells GlobeSt.com that Fairlane is eyeing
similar assets as part of a plan to accommodate office and industrial
tenants seeking to escape rising rental rates.
"We're out buying again," stresses Grill, who relays that
the path has not been easy, particularly because the crush of institutional
capital has abandoned its core-centric mantra in a desperate quest
for yield. That has driven pricing for the sort of buildings Fairlane
specialized in buying during earlier cycles to unreasonable levels,
he explains, requiring the pursuit of properties way off the institutional
radar screen. "My options in Boston are extremely limited,"
says Grill, who secured the Newton property in an off-market deal
orchestrated by John Nealon of W.J. Nealon Commercial for the buyer
and Warren Brown of Boston Commercial Realty on behalf of Fairlane.
Value-add was a consistent component of previous Fairlane investments
such as 98 North Washington St. in Boston's North Station and buildings
on Broad and Water streets that were harvested earlier this decade,
but the latest campaign essentially takes that challenge up a notch.
"Properties with serious due diligence issues are the ones
I want to look at," says Grill, anticipating those lacking
fatal flaws can be repositioned given the proper attention. Grill
says likely prospects may have been owned indefinitely by a user
who has deferred maintenance and would entertain a buyout, as in
the case of the Newton property at 59-83 Chapel St.
The properties must, of course, possess certain enduring qualities,
and Grill voiced confidence that his first conquest has the underpinnings
to attract office and flex tenants being priced out at more modern
buildings. "It's a great building physically," Grill says,
citing 14-foot clear ceilings and "outstanding" brick-and-beam
space, plus access to the Massachusetts Turnpike and several public
transit lines. Compared to rents above $40 per sf seen elsewhere
along Route 128 Central, the newly recast Chapel Business Center
can do a deal in the high teens to low $20's, adds Grill, whose
firm has retained the Codman Co. as exclusive leasing agents. "They
know this market very well," Grill says in announcing the selection
of Codman. The team will be led by Codman brokers David Campbell,
Drew Nelson, Brad Bevis and Richard Robinson.
Fairlane has already begun a capital improvements program, one that
will include site work, a new roof and gutters, signage and other
cosmetic enhancements. About 35,000 sf is immediately available,
and Grill says he is "encouraged by the response" initially
of the tenant community. The intention with Chapel Business Center
and other investments is to retain a long-term ownership, according
to Grill, whose firm acquired the first property through an affiliate,
Fairlane Chapel LLC. The group has retained Lincoln Property Co.
as manager of Chapel Business Center. Eastern Bank provided financing
for the acquisition.