Tech Square Up for Sale As MIT Finishes Revamp
By Thomas C. Palmer Jr.
THE BOSTON GLOBE
MIT is putting on the market Technology Square, its eight-building, 1.1-million-square-foot life sciences complex on the edge of campus near Kendall Square.
The university hasn’t set an asking price, but one real estate executive, who asked not to be identified, said the 5- to 10-story buildings could bring more than a half a billion dollars. MIT purchased the property in 2001 for $279 million.
“We bought this asset back in 2001 with the intention to reposition it as life sciences,” said Steven C. Marsh, managing director of real estate for MIT Investment Management Co. “We achieved that. It’s a great time for us to be taking money out of the deal.”
MIT transformed the buildings over the past five years from an office park into a combination of laboratory, research and development, and offices to accommodate the region’s expanding life sciences industry.
Among its tenants are Novartis AG, Dyax Corp., TolerRx Inc., Forrester Research Inc., and the information company Elsevier.
Like many private owners of commercial property, MIT is trying to sell property at a time of record prices and fierce competition for investment properties.
Cambridge has proven to be a strong magnet for companies with medical and research missions, and construction prices have risen dramatically since last year’s hurricanes. That drives up the cost of construction and makes existing buildings more valuable.
“It’s an incredible opportunity to invest with one of the premier technology schools where they’re going to maintain an interest,” said Rob Griffin, the president of Cushman & Wakefield of Massachusetts, which is handling marketing. “You’re investing in the hottest part of the local economy in the Cambridge area.”
Marsh said MIT chose now to sell all or part of the property, or “recapitalize,” because of favorable market conditions. “There is still a lot of capital looking for domestic product,” he said. “We think this looks like a pretty good profile property.”
MIT is seeking a buyer or a partner that will invest in the buildings, which occupy most of a huge block on Main Street in Cambridge. The buildings also have been reconfigured by MIT so they are now home to street-level shops, banks, and other elements of neighborhood life that until recently have been notably missing from much of the Kendall Square area.
Even though about 3.5 million square feet have been added to the office and lab market in Cambridge since 2001, vacancy has been dropping, as biotechnology and other medical-related companies jockey to be near MIT and Harvard University.
Vacancy in the Cambridge laboratory market declined to 16.5 percent in the third quarter of 2005 from 22.6 percent in 2003, according to the real estate firm CB Richard Ellis/New England.
MIT bought Technology Square, a group of seven buildings and parking garage for almost 1,600 cars between Binney and Portland streets, in February 2001 from Beacon Capital Partners LLC of Boston, a private real estate firm. The City of Cambridge encouraged use of the first floors of the building for retail shops, and MIT has leased space to 7-Eleven Inc., Quiznos Sub, FedEx Kinko’s, Fitcorp, MIT Federal Credit Union, and Bank of America Corp.
About 17,000 feet of retail now occupies the first floors of Buildings 600 and 700 Technology Square.
“It makes the property look better and is a great opportunity to get some life into Main Street, which has always been a challenge historically,” Marsh said.
MIT hopes to add about 20,000 square feet more, including space in three other buildings. The university is looking for a new tenant for space recently vacated by Polcari’s restaurant, and new shops are expected to be added to the fronts of 200 and 500 Technology Square.
The garage is located at Portland Street and Broadway. The Charles Stark Draper Laboratory Inc., at 555 Technology Square, on the Broadway side of the block, is separately owned and is not part of the group being sold.
The old Boston real estate firm Cabot, Cabot & Forbes Inc. and MIT jointly developed a five-building Technology Square campus over about 10 years ending in 1980, when they sold to Prudential Insurance Co. of America. Tenants then included Polaroid Corp., Draper, and MIT.
In 1998 Beacon Capital Partners paid $123 million for Technology Square for use as office space and began upgrading it. The firm took down one building and added four. As soon as MIT took over in 2001, it began preparing the space for life sciences uses.
MIT’s campus has about 11 million square feet of space, but the university has a financial interest in about 6 million additional square feet in the surrounding area. Three million or so of that is in University Park, located on the other side of the main campus and developed in a joint venture with Forest City Enterprises Inc.
Noting that MIT was involved in the original development of the area, Marsh said the university is open to selling or taking on a partner in ownership of the buildings — but would prefer the latter.
“Our hope is we remain involved here in some fashion,” he said.