Westborough's commercial real estate market is red hot
PHOTO/RICK SAIA
David Ferris of Ferris Development bought One Research Dr. in February. He has already filled 35,000 square feet of vacant space, and is in talks about filling the rest.
If you own valuable property and are looking to sell, Westborough's a good place to be in 2014.
Five commercial, retail or residential properties in the town worth $9 million or more have changed hands so far this year, according to deed records. In contrast, not a single commercial sale of more than $6 million was recorded for all of 2013.
Even less expensive parcels have found a greater number of suitors.
Only three Westborough commercial properties worth at least $1 million sold in 2013, deed records indicated. But through the first five months of 2014, that figure is already at seven.
“The bottom is behind us and there's some momentum in leasing, so buyers want to catch the wave,” said Philip DeSimone, managing director of commercial real estate broker Jones Lang LaSalle in Boston.
Westborough's real estate recovery is, first and foremost, a story of access.
Immediately following the recession, real estate investors took a conservative approach and stayed primarily along Route 128, where prices and vacancy rates were more stable, said Doug Jacoby, senior vice president of investment for Colliers International in Boston.
As supply tightened and good deals became harder to find, investors began moving west toward Framingham and Natick, DeSimone said.
Then, as prices rose inside the 128 and Interstate 495 corridors in 2011 and 2012, investors began to hunt for value beyond 495, according to Lester Hensley, chair of the Westborough Planning Board and Economic Development Committee.
“Investors were always there waiting,” Westborough Town Planner Jim Robbins said. “And when the time is right, they'll move.”
Town officials also attribute some of the activity to pro-development zoning reforms, Hensley said. Westborough now allows utility easements and retention basins on a land parcel to count toward open space requirements, he said, freeing up more of the property for development.
The town has also streamlined the process by removing bylaws that are superseded by state regulations and eliminating language that could be confusing, Hensley said.
And after years of restricting access to capital, commercial lenders have finally begun to loosen the flow of money, making it easier to finance large acquisitions, Robbins said.
That became evident this winter, when two investment groups snatched up massive commercial properties near Interstate 495.
Reeling in office complexes on Research Drive
The safer acquisition came from Manhattan-based Angelo Gordon & Co., which in January bought a 282,000-square-foot office complex at 25 Research Dr. that BJ's Wholesale Club has leased until 2026. The real estate investment firm could get a handsome return on its $25.69 million purchase if development takes place on the rest of the 68.4-acre site.
The parcel can support an additional 250,000 to 500,000 square feet of development, according to Jones Long LaSalle, which marketed the property under prior ownership.
The gutsier — but potentially more rewarding — move came from Marlborough-based Ferris Development, which picked up the former University of Phoenix building in February.
Ferris paid only $21.57 million for the building at 1 Research Dr., which is nearly $34 million less than what the 296,330-square-foot building fetched in October 2005.
What's the catch?
The building was nearly half empty at the time of the sale, according to David Ferris, founder and CEO. So, he spent several million dollars to improve the lobby and bathrooms, and lowered the asking price from $30 per square foot under the prior owners to $18.
But early signs are favorable.
Ferris said leases have already been signed for roughly 35,000 square feet of the unoccupied space, and he's in active discussions with at least 15 other companies about the remaining vacancies.
Given today's low interest rates, Jacoby said full occupancy isn't a prerequisite for making money.
Indeed, Westborough's linkages to all the region's major transportation networks — 495, Route 9 and the Massachusetts Turnpike — have made it the single most appealing community along 495 for investment purchases, Jacoby said.
“We're at the crossroads of the state,” Robbins added.
Attention from retailers
For this reason, Hensley said national retailers looking to get a foothold in the Bay State have increasingly turned to the town of 18,300 people.
Atlanta-based fast food chain Chick-fil-A plans to open its second stand-alone New England restaurant later this summer in the Speedway Plaza near the corner of Route 9 and Otis Street. And in April, CarMax purchased more than 40 acres further east on Route 9 for $9.65 million, and plans to begin design work next year on the company's second Massachusetts store.
Michelle Ellwood, a spokeswoman for the Virginia-based company, said the site at 170-178 Turnpike Rd. offers great visibility and is well-situated among car dealerships and retailers.
The Westborough shopping spree has extended beyond owner-occupied retail properties. Kimco Realty, North America's largest publicly-owned shopping center operator, bought Westmeadow Plaza in May for $9 million.
The Long Island based company said Westmeadow — along with the 23 other New England retail properties it acquired — has rents well below market value, making profitability achievable through rent increases and lease rollovers.
Nearly 25,000 square feet of the 151,200-square-foot complex are vacant, though prospective tenants were negotiating last month to fill the unused space, according to former leasing agent Mary Powers.
And a newly-formed group of investors hopes to earn a nice return with the Indian Meadows Golf Club, which they bought in May for $1.65 million.
Yogesh Patel, a partner with the group, EK Parivar LLC, said Route 9 access made the site a good value, and the group plans to do little beyond a few maintenance improvements.
“We love the golf course,” he said. “It's beautiful. We want to keep it this way for the long term.”
More building on the way?
The biggest retail deal, though, is likely yet to come.
David “Duddie” Massad, chairman of Worcester-based Commerce Bank and one of the region's largest commercial property owners, wants to unload a 116-acre parcel that he says would be perfect for a shopping center.
An LLC affiliated with Massad's family bought the undeveloped Boston Hill property straddling the Westborough, Shrewsbury and Northborough lines in 2008 for $12.95 million.
Massad said he considered developing the property at the southeast corner of routes 9 and 20 himself, but ended up letting it sit through the recession and isn't interested in building the site up today.
“I really never had time to do anything with it,” Massad said. “I was much too busy.”
Massad said the property has attracted significant interest in the six months it's been on the market. He said high traffic volumes and good exposure to several towns make it the best undeveloped retail site left in the area.
Massad was also the seller on the CarMax site at 170-178 Turnpike Rd.
The single biggest deal of the year in Westborough, though, comes out of the residential sector, thanks to the sale of the 562-unit Fountainhead Apartments to Northland Investment Corp. of Newton for $83.75 million.
“The people who had been looking at property have finally been able to buy,” Robbins said.
Editor's Note: This story was corrected at 12:10 p.m. to reflect that Chick-fil-A already has one stand-alone location open in New England.
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