Federal Realty Investment Trust’s $150 million purchase of three Boston properties from Eastern Development announced on Monday bolsters the Rockville, Md.-based REIT presence in the region. And, as with its 2005 purchase of Assembly Square, Federal is looking to convert at least one of the properties into a mixed-use center.
At the heart of the deal is Linden Square. Federal plans to invest $50 million to redevelop the property to create a project with more than 200,000 square feet of retail, 17,000 square feet of office space, a spa and a health club. The first two phases of the redevelopment campaign will be completed in 2008.
“The bulk of the investment in this deal is in Linden Square, which is a fabulous opportunity,” according to Jeff Berkes, chief investment officer and executive vice president for Federal. “ It’s off the charts in income and spending potential and there is limited competition in terms of retail space. We expect significant net operating income and rental growth from the Linden property. The other two properties are good properties in their product category, but Linden Square is truly special.”
Linden is situated in one of the most affluent communities in the area. Average household income within a three-mile radius of the property is $191,000, according to Berkes.
The company already has one large project in the pipeline in the area--Assembly Square in Somerville, Mass. Federal purchased the 45-acre parcel in early 2005 for $64 million and is redeveloping the site as a mixed-use project. It’s already spent $38 million on the project. Earlier this year, the first phase of the redevelopment, a power center, opened. It is currently completing the master plan for the rest of the site.
The other two Boston properties in the deal are the Chelsea Commons, a 192,000-square-foot community shopping center in Chelsea, and North Dartmouth Shopping Center, a 28.2-acre land parcel that features triple net leases with such tenants as Lowe’s Home Improvement and Stop & Shop. The deal with Eastern also includes an 18.4-acre land parcel in Wellesley, Mass. Federal also purchased three grocery-anchored shopping centers in west Maine and New Hampshire that it intends to sell in the near future. The properties cost approximately $60 million.
A recent Marcus & Millichap National Retail Research Report ranks the Boston 15th on its list of 42 markets, based on supply and demand indicators. Asking rents in the area are expected to increase by 3.5 percent in 2006 to $21.55 per-square-foot. Economists also expect a 1.3 percent rise in employment. According to Marcus & Millichap, properties that offer redevelopment and repositioning opportunities will be most sought after.
-- Elaine Misonzhnik