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BOSTON-After starting with a bang, the 2008 investment sales pace in Greater Boston fizzled, dramatically, and is limping along heading towards midyear, according to a report from Colliers Meredith & Grew. Even when not including the $4.2-billion purchase of Equity Office Properties assets by Blackstone in early 2007, Q1 transaction volume paled in comparison to the start of last year, particularly for super-sized trades.

“It was harder to finance the bigger deals,” says CMG research director and SVP Mary Sullivan Kelly, whose firm estimates total sales at $1.16 billion for all property types, including industrial, multifamily, office and retail. That is $450 million below the 2007 Q1 results when discounting the Blackstone/EOP activity. Particularly in the suburbs, transactions were generally under $20 million, Kelly tells GlobeSt.com.

The $477-million purchase of a 49% interest in 53 and 75 State St. from RREEF by majority owner Brookfield Financial Partners made up the lion’s share of Boston office building sales in Q1, relays CMG. Brookfield, in a deal first reported by GlobeSt.com, took full control of the two office towers in January after Rreef’s share was shopped to other investors for much of 2007. Five other office building sales pushed the total to just $507 million for Boston, well below the $850 million traded in Q1 2007, minus Blackstone/EOP. Among the early 2008 sales was the acquisition of 4 Liberty Sq. to locally-based Synergy and 285 Summer St. to New York City-based Aegean Capital.

The pace was even slower in Cambridge, where a $24.5-million sale/leaseback involving New Boston Fund, as the buyer, was the only quarterly completion compared to $140 million in Q1 2007. Suburban volume plunged from $800 million to $177 million. Among the largest deals was the sale of Rivertech Park in Billerica for $45 million, this time with New Boston Fund on the seller side, as reported by GlobeSt.com.

A flight to quality has been one result of the disrupted marketplace, says CMG, with investors targeting core communities and higher-end assets, partly from lenders aiming to “cherry pick” deals. The dearth of commercial mortgage backed securities money has severely curtailed debt availability, and CMG says banks and insurance companies are being rigid in their underwriting assumptions. According to sources, several promising deals have been slowed, or quashed completely, in recent weeks, some of which reportedly collapsed due to lender intransigence.

Most experts had anticipated a torpid beginning for investment sales, says Kelly, and she concurs that the immediate future remains cloudy. On the bright side, however, Kelly notes that CMBS spreads have started to drop, possibly signaling that the capital freeze may be thawing. “We’ll take any good news we can get,” Kelly says, adding that real estate denizens can be comforted, realizing that an 8.7% vacancy rate and average rents back into the $50 per sf range are impressive fundamentals for Boston, particularly with only limited new inventory underway. “It shows that when the market gets its footing back, we are going to be in a good place.”

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