Patrick aide sees money for budget in Saltonsall lease

Photo Courtesy: MGNonline

BOSTON (SHNS) – While the state’s development agency is still negotiating terms with an unidentified buyer, Gov. Deval Patrick’s chief budget-writer estimated the sale of a Beacon Hill office building lease would bring in $90 million in state revenue.

The buyer will become landlord to a variety of state agencies housed at 100 Cambridge Street, which now includes offices for the attorney general, the Department of Energy Resources and the Department of Revenue, among others.

The state rents 48 percent of the 22-story office tower with a lease expiring in April 2052, according to a brochure prepared by Colliers International, which is managing the sale. Private companies rent the top 10 floors.

The ground lease that is for sale would last until April 30, 2082 when it would revert back to the state, according to MassDevelopment, which rehabbed the building and rented the space out.

MassDevelopment spokesman Mark Sternman said there were nine bidders for the property and the entity negotiating purchase of the property will be made public when the deal is made.

Secretary of Administration and Finance Glen Shor disclosed the estimate while disputing the Massachusetts Taxpayers Foundation’s analysis that the budget hole is $750 million after Patrick’s $250 million in spending cuts. Shor is standing by the administration’s forecast of a current roughly $70 million budget gap, according to a spokeswoman.

“The report also fails to include proceeds to the general fund from the sale of the lease at 100 Cambridge Street, which we currently estimate to be about $90 million,” Shor told the News Service last week.

Administration and Finance Undersecretary Scott Jordan told the News Service the total sale price “will be much higher than that.” Before the state receives its estimated $90 million cut, proceeds of the sale will pay off bond holders, financiers and MassDevelopment, which both invested money in the project and forewent management fees, he said. Jordan said he expects a purchase and sale agreement before the New Year and a close on the deal in the spring.

At its last meeting MassDevelopment voted on how it would spend its expected $48 million share of the sale, according to Sternman. He said to aid with filling the state’s budget gap, MassDevelopment relinquished $10 million in brownfields money and $13 million in “transformative” development funding for cities that had been included in this year’s jobs bill.

MassDevelopment voted to use the lease proceeds to restore the $13 million for city developments and spend $10 million for lending to rental-housing developers, $10 million for investments outside “gateway cities,” $10 million for redeveloping blighted buildings and $5 million to recapitalize a mortgage guarantee program, Sternman said.

The Leverett Saltonstall Building was built in 1965 and in 1999 the state shuttered its office building after tests revealed asbestos and ventilation problems. The renovations began in 2002 and the building reopened in 2004.

Colliers told potential investors there are opportunities to raise rents in the building, which also includes a garage.

“This offering provides investors the opportunity to acquire a Class A tower with stable revenue coming from the Commonwealth of Massachusetts’ long term lease and the 332-space parking garage and the ability to drive rents in the private tenant spaces, as they are currently 26% below market,” Colliers wrote in its brochure. It said after “reaching stabilization in 2007” the building has never been more than 5 percent vacant.

The second largest tenant in the space is American Student Assistance, a non-profit that helps students finance higher education. Other tenants include the law firm Prince Lobel, which occupies the top floors, the architecture firm Cannon Design and the lobbying and public relations outfit Dewey Square Group. Massachusetts General Hospital has terminated its lease on two floors effective June 30, according to Colliers.

Rite Aid, early education provider Bright Horizons and Citibank rent retail space. Condominiums, which ring the outside of the development down the hill from the State House, are not included in the lease that is for sale.

Shor told the News Service the $90 million should be considered in regards to the state’s current financial troubles. MTF President Michael Widmer said the sale of a lease is a one-time revenue influx and should not be used to balance an operating budget shortfall.

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