Ground Game

As reported by The Real Reporter

WALTHAM — It took a bit longer than normal, apparently owing to the presence of an intricate ground lease, but Albany Road Real Estate Partners has completed its purchase of 2 & 3 University Office Park, that 296,850 sf of first-class office space with the added allure of a commuter rail stop connecting to Boston. The price tag of $47.5 million equates to $160 per sf reaped by exclusive listing agent JLL’s client, a private trust affiliated with neighboring Brandeis University.

According to marketing materials in circulation, investors chasing 2 & 3 University Office Park were enticed by solid park fundamentals including an 89.1 percent occupancy rate whose 21 tenants have a weighted average lease term remaining of 5.2 years. In-place rent, while a healthy $33.44 per sf, is still 11 percent below average in the Route 128 Central realm which JLL refers to as “a fortress market,” or typically immune to deep rental corrections. Anchor tenants Net-Cracker Technology Corp. and Commonwealth Financial Services account for 41 percent of the existing rent roll at the park, and their combined lease terms average 8.2 years.

JLL Managing Di- rector Frank F. Petz concurs there are inves- tors who steer clear of ground lease arrange- ments, at times due to a mandate of covenants focused on risk aversion. That, he explains, opens the opportunity up to flexible capital such as Albany Road who can navigate such nuances if deemed worth the effort. “It is quality product,” Petz says of the underlying real estate where net operating income is set to grow by 38 percent over the next five years. A “wild card” is the public transportation and roadway aspects, he adds.

“A lot of places call themselves transit-oriented, but this really is,” Petz says, so much so JLL declares it the most accessible park in suburban Boston. “It is very rare and just what investors are looking for today.” North Station is just five station stops away by rail, notes JLL, whereas for those traveling by automobile, the park is located along Route 128 at the juncture of the Massachusetts Turnpike. That means direct access— as in zero traffic lights—to other “W” towns such as Wayland, Wellesley and Weston.

Albany Road is a Boston-based investor founded in summer 2012 whose platform has expanded beyond New England to mar- kets in the southern US, with other office in Nashville and Dallas-Fort Worth. Found- ed by President Christopher J. Knisley, the company was last featured in Real Reporter this past November where it had surpassed $800 million in transaction volume. Knisley was unavailable for comment regarding the purchase of the Waltham buildings, for which his firm borrowed $36.5 mil- lion from Liberty Bank. Knisley said in that November article Albany Road hoped to invest a minimum of $100 million annually going forward, about one-third of which would be targeted to New England CRE.

The JLL Capital Markets team orchestrating the exchange of University Office Park’s ground lease includes Senior VP Matthew Sherry and Associate Thomas Ragno while others on the assignment were Managing Director Jason Fivek and Senior VP Brendan Cohn providing leasing guidance. Senior VP Heather Brown offered debt and structured finance options.