American Financial Acquires State Street Center for $705M

The 36-story building just opened its doors last June, but this past October, John Hynes, managing partner and principal of Gale Co., told GlobeSt.com that his firm was thinking very seriously about putting the building up for sale, specifically because of the level of interest in the property that was shown by investors.

The developers of the tower, which is situated between Chinatown and South Station in the city's financial district, scored a huge coup when State Street Corp. signed on nearly three years ago to lease the entire building at a time when lease rates were still relatively high. The building has since been renamed State Street Financial Center. It is this tenancy, which runs for 20 years, that most industry analysts agree is the property's chief attraction.

In a statement, American Financial says the deal with State Street has a total net lease value of more than a $1 billion. The company says it will receive additional income from the operations of the 900-space below grade parking garage. The acquisition is scheduled to close within two weeks. American Financial says it plans to finance the acquisition with available cash and a 20-year secured, fixed-rate loan in excess of $500 million.

Nicholas S. Schorsch, American Financial's president and CEO, says the acquisition further diversifies the REIT's tenant base, while enhancing its overall credit quality. "It adds a large, fully-leased asset to our cash-flow stream, thereby permitting us to pursue acquisitions of other real estate portfolios, including bank branch portfolios, which may include some vacancy." He says it also deploys a portion of available cash on a basis that is accretive to FFO and AFFO per share.

In the city's most recent large deal, Beacon Capital Partners acquired John Hancock Financial Service's three-building portfolio for $910 million, or about $300 per sf. Kingston Bedford Joint Venture was represented in this transaction by Morgan Stanley.