CAMBRIDGE, MA-In a development one observer terms “a landlord’s worst nightmare,” a 180,000-sf office lease to Microsoft Corp. has been disrupted by an option held on space rented to existing tenant PA Consulting Group. The unforeseen snag could influence Microsoft’s high-profile deal, according to sources tracking the imbroglio at One Memorial Dr. The 17-story, 533,000-sf tower is owned by the Blackstone Group through its real estate company, Equity Office Properties.

“Someone screwed up big time,” one source maintains in estimating to that the faux pas could amount to “a $100-million mistake” given the length and terms of the lease, which reportedly escalates to a near-record rate for Cambridge of $72 per sf. When signed earlier this summer, the agreement was hailed as a landmark deal for the building and the market. Microsoft was expected to move close to 1,000 employees to One Memorial Dr. during a three-part lease up slated to begin next month.

When contacted by, EOP had no comment beyond stressing that work is proceeding on the first piece of Microsoft’s relocation, while an official at PA Consulting says she is unaware of any dispute. A Microsoft spokesman declined to say whether its lease would be impacted, only offering that, “since this is a private dispute to which we are not a party, we have no comment.”

The overlooked tenant reportedly has an option for space on the 15th, 16th and 17th floors. The problem, according to sources, occurred because the option was not addressed when Microsoft agreed to expand its commitment to One Memorial Dr. from an initial lease signed in April. Under terms of the final lease, Microsoft was to begin occupying the top three floors by 2009 while moving to the first, second, ninth, 10th and 11th floors in the two initial rounds.

In one scenario offered by brokers, Microsoft could argue that Blackstone is in default of the lease for being unable to deliver the space as promised. Others speculated that EOP might try to craft a settlement with PA Consulting that would allow the Microsoft lease to remain in place. Blackstone/EOP owns substantial space in Boston, including some of its top office towers.

Observers spoken with also debated the frequency of missing such an option. One industry veteran claims it is not particularly uncommon, but a colleague calls the transgression “very rare.”

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.


Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join now!

  • Free unlimited access to's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including and

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2024 ALM Global, LLC. All Rights Reserved.