Calare Dodges Bullet, Stares Down Another…

December 1, 2010

128 South market Boston Business Journal – by Craig M. Douglas

Calare Properties Inc. has dodged a bullet by quickly filling a massive vacancy in the battered-and-bruised 128 South market. Now it faces the unenviable prospect of servicing its circa 2007 debt load with circa 2010 lease rates.

The Hudson-based real estate investor appeared to be against the ropes this summer relative to a 414,000-square-foot warehouse and distribution facility it acquired in 2007 for $20 million. At the time, the property at 57 Littlefield St. in Avon had a slate of leases set to expire by December, the largest of which was a 124,000-square-foot deal with Polar Beverages Inc. The alarm bells formally went off in July when Polar confirmed it was moving to a similar space up the road on Broadwell Street in Avon.

That move officially occurred in September, around the time the $17.5 million loan backing 57 Littlefield transferred to a special servicer.

For those of you just tuning in, the Route 128 market’s southern rim — which includes Avon — is more or less on life support. As of Sept. 30, more than a quarter, some 26.3 percent, of its commercial space was available for lease, according to Boston’s FHO Partners. That’s pretty tough. In fact, it’s right up there with the worst-of-the-worst markets in the Bay State … yes, we’re talking about you, 495 North.

Nonetheless, Calare struck gold, or yellow, when it hit the bricks for a potential Polar replacement this fall. Now setting up shop at 57 Littlefield: Yell-O-Glow Corp., an Everett-based wholesale food distributor. The company agreed a month or so ago to move its distribution center in Rhode Island to the spacious lot vacated by Polar in Avon. Take that Curt Schilling.

Bill Manley, Calare’s president, said the new Yell-O-Glow lease as well as a “moderate-to-long term” extension for RecordKeeper Records Management Systems’ 120,000-square-foot lease at 57 Littlefield puts him at full occupancy. “It wasn’t easy,” he said, noting that Calare had to roll up its sleeves to land such a large tenant in such a challenged region. “The 128 market has a lot of broken buildings.”

But today’s market being what it is, Manley said the property’s rent rolls are extremely depressed from what they were when Calare acquired the building three years ago. That deal was financed by a 10-year note originated by Royal Bank of Canada.

Last year, 57 Littlefield generated $2.75 million in revenue, threw off nearly $1.6 million in cash and had some $972,319 in annual debt service. No doubt those revenue and cash figures are down — way down — to uncomfortable levels, versus the property’s debt obligations. It will be interesting to see whether Manley, like virtually every other property owner in the country, can win any concessions from his servicer or lender, Royal Bank of Canada, before things get too tight — and that’s with a building that’s 100 percent occupied. One shudders to think of the options facing some of the 128 Market’s less-fortunate property owners at the moment.