Shorenstein Properties has closed on the purchase of Center Plaza in central Boston, a 717, 000 square foot office and retail complex, centrally located in downtown Boston from Equity Office Properties Trust, a unit of the Blackstone Group, for US$307 million.
Shorenstein is a private real estate development company, headquartered in San Francisco, with offices also in New York. The company is headed by Douglas Shorenstein, its Chairman and CEO, and specializes in the ownership and operation of office properties. Currently, Shorenstein owns and manages over 25 million square feet of office and mixed-use properties, located nationally in 24 different cities of the United States.
Center Plaza was developed originally by Beacon Properties at the start of the nineteen seventies. The property consists of three nine-storey buildings with 620, 000 square feet of office space, 77, 000 square feet of retail space and 19, 000 square feet of storage space – plus a 575 parking garage. While it is an older property it has been exceptionally well maintained and kept completely up to date.
Walter Shorenstein and Douglas Shorenstein – courtesy Shorenstein Properties
Douglas Shorenstein said of the deal “This is an excellent property to own in a market with strong appeal to a wide range of tenants, including those looking for creative, open floor environments in urban settings close to transit and amenities. We believe this property is well positioned to benefit from our ability to add value over time through hands-on management and leasing expertise.”
Center Plaza sits strategically at the entrance to the city’s posh Beacon Hill neighborhood and across Cambridge Street from Boston City Hall. The buildings are also adjacent to the Boston Transit Authority’s Government Center station, which serves as a connection point for the city’s rapid transit system.
Shorenstein acquired this building on behalf of its tenth third party investment fund, Shorenstein Realty Investors Ten which it formed in 2010 with about US$1.23 billion of committed capital, including US$75 million of Shorenstein’s own money invested in it.
The mixed-use complex is 95% leased currently, anchored by the Federal Bureau of Investigation and is also home to an array of law firms and financial institutions. It is reported that Shorenstein took out a US$207 million mortgage for the building from HSBC and put up US$100 million of the Fund’s equity into it as well to complete the transaction.
This is Shorenstein’s fourth purchase in Boston and its second area acquisition in the city for this new fund.
To date Shorenstein has now sponsored ten of these closed-end investment funds since 1992, which have had total equity commitments of US$6.7 billion during their lives, of which Shorenstein committed US$573.5 million itself. They demand long term commitments from their investors, and do not appear to be traded on an exchange – offering no short term liquidity. In return they can provide very efficient investment performance over the long term.
The Shorenstein Funds have also been an excellent way for Shorenstein to grow as a development company, bringing their expertise to bear on a much larger portfolio without excess leveraging of their own corporate balance sheet. During the term of each one Shorenstein is committed to invest exclusively through that vehicle so that interests are always aligned.
Center Plaza itself had been part of the Boston portfolio of Equity Office, which the Blackstone Group had bought from Chicago billionaire Sam Zell in late 2006, right at the top of the last real estate cycle, for US$20 billion.
The Shorenstein Family : Walter Shorenstein
Shorenstein Properties was founded in its present form by Walter Shorenstein, who led the company until 1995 when he stepped back from day to day management in favour of his son Douglas.
Discharged from the military in 1946 after the Second World War with the rank of Major, he went to work at real estate brokerage firm Milton Meyer & Company, becoming a partner in the firm in 1951.
In 1960 he became the owner of the firm, renamed it the Shorenstein Company and embarked on extensive real estate development activities as principal rather than, as before, primarily only as agent. Eventually he became the largest owner and operator of Class A office space in San Francisco.
Married to Phyllis they had three children; his son Douglas, and two daughters, Carole and Joan – Joan died of cancer in 1985. Walter himself died in 2010 at the age of 95.
In memory of his daughter Joan, Walter and Phyllis Shorenstein founded the Joan Shorenstein Center on Press, Politics and Public Policy at Harvard’s Kennedy School of Government. He also sponsored the Shorenstein Initiative at Stanford University’s Asia/Pacific Research Center, as well as programs at UC Berkeley’s Institute of East Asian Studies.
Douglas Shorenstein, who today is 58, joined the family business in 1983 and became Chairman and CEO in 1995. During his tenure, the company has evolved from a San Francisco focused company into a real estate investment, development and management company active throughout the United States.
Mr. Shorenstein supports numerous civic and philanthropic causes and serves on the board of many such institutions. He is also the immediate past Chairman of the Board of Directors of the Federal Reserve Bank of San Francisco, a member of the Federal Reserve System.
In 2011, Mr. Shorenstein was inducted into the Bay Area Business Hall of Fame.
Prior to joining Shorenstein Properties, Doug Shorenstein worked as a real estate attorney with the law firm of Shearman & Sterling LLP in New York in its Real Estate Group.
He graduated from University of California at Berkeley with a B.A., and from University of California, Hastings College of the Law with a J.D.
Doug Shorenstein is married to Lydia and, like his father, has a son Brandon, and two daughters Sandra and Danielle.