An affiliate of the merchant bank BDT & MSD Partners, reportedly in partnership with developer and investor DivcoWest, has acquired the 1.1 million-square-foot One Lincoln office tower (formerly State Street Financial Center) in downtown Boston at a foreclosure auction.
Their $400 million bid for the 36-story tower was the only one, with the change in ownership representing the asset’s lenders taking the building. MSD Capital holds the larger of the loans secured by the property, at $763 million, according to CommercialEdge. DivcoWest holds a $257 million loan secured by One Lincoln.
The former owner of the building, Fortis Property Group, acquired the tower in 2006 for $889 million from American Financial Realty Trust.
In 2022, Fortis refinanced the asset to the tune of $1 billion, including $200 million for upgrades to the 2003-vintage property. The overhaul included renovations of the lobby, amenity center, food services and reconfigured floorplates. In 2023, however, One Lincoln anchor tenant State Street decamped from its 750,000 square feet to another downtown Boston location.
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Some of the vacated space, about 250,000 square feet, will be occupied later this year by private equity firm HarbourVest Partners, which inked a lease for the space in 2022.
Another major tenant, WeWork, still occupies space in the building, but only a fraction of its former total. The company leases 64,323 square feet, or three floors, down from its pre-bankruptcy nine floors, according to CommercialEdge data. Other tenants at One Lincoln include CFGI, HTMLPanda, Stanton Chase, Taylor Hopkinson and Sherin and Lodgen.
Building amenities at One Lincoln include various dining options, such as an artisanal market, biergarten and al fresco dining space. There are rooftop tennis courts and basketball courts, a boxing ring, fitness center and 1/8-mile outdoor walking trail.
CRE mortgage delinquencies edge up
Overall, commercial property mortgage delinquencies, which often evolve into foreclosures, increased in the fourth quarter of 2024, according to the Mortgage Bankers Association. Many of those are CMBS-associated loans, with 5.78 percent of such loans either 30+ days delinquent or already REO in the fourth quarter of 2024, up from 4.3 percent a year ago.
More delinquencies are likely to come. The organization estimates that almost a trillion dollars’ worth of CRE loans are maturing in 2025, and considering challenging economic conditions, that may result in some further increases in delinquencies if borrowers cannot successfully refinance these loans.
The largest recent office asset loan to become delinquent was $266.7 million associated with the 1.4 million-square-foot Bank of America Plaza in Los Angeles, Trepp reported in February. The building is 79 percent occupied. At present, the CMBS loan is nonperforming, the company noted.