Amazon-Leased Assets Land $97M in Boston Suburb

Atlantic Management and SMMA transformed 50 Otis St. into an robotics R&D space. Image courtesy of Newmark

Atlantic Management has landed financing totaling $96.5 million for two industrial assets totaling approximately 500,000 square feet in Westborough, Mass., a Boston suburb. With the assistance of Newmark, the company secured a $70.5 million refinancing loan for the property at 50 Otis St. and a $26 million construction loan for a build-to-suit project at 54 Otis St.

Located along Route 9 roughly 35 miles from Boston’s central business district, 50 and 54 Otis sit near several major thoroughfares, including Interstate 495, Interstate 95 and the Massachusetts Turnpike. Atlantic acquired 50 Otis St. for $6.5 million in 2016. The building had been one of several that served as the home of AstraZeneca. With the assistance of architecture firm SMMA, Atlantic transformed 50 Otis into an R&D and industrial destination that consists of a re-envisioned version of the original AstroZeneca “cube” building along with new construction for a total of approximately 406,400 square feet.

Amazon Robotics Innovation Hub leased 50 Otis in its entirety, investing some $40 million in to create 350,000 square feet of corporate office space and R&D labs.

In addition, Amazon has signed on expand its footprint by means of a 100,000-square-foot, build-to-suit project at 54 Otis. Located on a neighboring 11-acre site, the property will consist of 80,000 square feet of high-bay space, which will be used primarily for testing and support, and a 20,000-square-foot office component.

Financing in a turbulent climate

Amazon’s robotics unit is expanding its footprint with a 100,000-square-foot facility at 50 Otis St. in Westborough, Mass. Image courtesy of Newmark

Members of Newmark’s U.S. capital markets group and debt and structured finance group represented Atlantic Management in the transactions. The team included Robert Griffin, David Douvadjian Sr., Timothy O’Donnell, Brian Butler, David Douvadjian Jr., and Conor Reenstierna.

Newmark is not disclosing the details of the transactions. However, the fact that both properties are 100 percent leased to Amazon, which is no longer in a leasing frenzy, may have influenced the lending community’s interest in providing the financing in the pricier lending environment.

“For the first time in recent memory, market participants are indicating that cap rates for institutional quality industrial product are expanding,” noted Chatham Financial in its second-quarter lending report. “While demand remains high and fundamentals in the space are still viewed as second to none, steadily increasing inflationary pressures have begun to impair the value perception of investment grade credit on long-term leases that cannot be marked-to-market in the face of growing CPI and PPI indices.”

In the second quarter, Chatham’s market-rate conclusion for secured fixed lending on industrial collateral increased 120 basis points, with 10-year fixed rates for creditworthy tenancy and desirable collateral landing at 4.75 to 5.75 percent. Chatham’s market-spread conclusion for secured floating-rate lending on industrial collateral rose 20 basis points, leaving the three- to five-year term floating spreads for creditworthy tenancy and desirable collateral in the range of 1.95 percent to 2.5 percent.

Regardless of the increasing price of debt, lenders remain keen on industrial. According to the Chatham report, “Many core distribution markets are experiencing sub-1 percent vacancy, and many lenders still hold a positive view of industrial construction on a relative value basis.”