Wells REIT II Takes IBM’s Suburban Boston Campus in $88.5M Deal

What a difference a few years and a good lease make. Four years after its $25 million acquisition of the then-vacant 490,000-square-foot office complex at 550 King Street in Littleton, Mass., a joint venture of Angelo Gordon & Co. and National Development has sold the fully leased asset to Wells Real Estate Investment Trust II Inc. for $85.5 million in an off-market transaction.

 What a difference a few years and a good lease make. Four years after its $25 million acquisition of the then-vacant 490,000-square-foot office complex at 550 King Street in Littleton, Mass., a joint venture of Angelo Gordon & Co. and National Development has sold the fully leased asset to Wells Real Estate Investment Trust II Inc. for $85.5 million in an off-market transaction. Home to IBM’s regional headquarters, the property holds the title of the largest software campus in Massachusetts.

Consisting of two connected three-story structures, the IBM Littleton campus occupies an approximately 40-acre parcel in the I-495 technology corridor about 30 miles northwest of Boston. The property was originally developed for Digital Equipment Corp. in 1984, and underwent an extensive renovation in 2008. New owner Wells REIT has committed to financing tenant improvements to the tune of $5.5 million for IBM, which occupies the entire complex under a net lease agreement that runs to 2020.

For Norcross, Ga.-based Wells REIT II, the most valuable feature of the asset is its occupant. As noted in a report filed by Wells REIT II with the U.S. Securities and Exchange Commission, “the financial condition and results of operations of the tenant, IBM, is more relevant to investors than financial statements of the property acquired.” With the purchase, the office REIT’s portfolio now encompasses 91 buildings accounting for an aggregate 21 million square feet in 23 states and Washington, D.C. The buildings are 96 percent leased on average, a performance that outpaces the national office market by a wide margin. By the end of 2009, the average office vacancy rate had reached 17 percent, according to Marcus & Millichap Real Estate Investment Services Inc.