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BANKER & TRADESMAN - Burlington Woods Heads To Foreclosure

April 20, 2010

 
 
Griffith Properties is staring down a foreclosure at Burlington Woods, a 291,000-square-foot suburban office park that serves as the investment firm's corporate headquarters.

GE Capital, the lender that financed Griffith's 2007 purchase of Burlington Woods, has moved to seize the Burlington complex, according to a legal notice filed today. GE has scheduled a May 11 foreclosure auction with auctioneer JJ Manning.

In January, Banker & Tradesman reported GE was close to striking a deal to displace Griffith with Boston developer Berkeley Investments. That deal would have likely required Griffith to sign a deed in lieu of foreclosure and hand back the keys to the office park. It was not immediately clear whether the foreclosure notice means the deal with Berkeley had fallen apart, or whether Griffith was not willing to leave voluntarily. Neither firm could immediately be reached for comment.

Griffith purchased the office properties at 1, 2 and 3 Burlington Woods in June 2007 for $66.6 million, or approximately $230 per square foot. GE Capital supplied Griffith with a $55.7 million acquisition loan. The buildings sit just off Route 128, near the Burlington Mall and Equity Office's New England Executive Park.

At the time of purchase, the properties were 92 percent leased. Griffith planned to use tenant turnover to force rents skyward. The firm projected rents around $32 per square foot, going so far as to reject deals with rents in the high $20s, multiple sources said. Now the three buildings have large blocks of vacancy, and market rents have fallen into the low $20s.

One industry source told Banker & Tradesman that GE's deal with Berkeley would have taken the property from Griffith for $110 per-square-foot, or less than half what Griffith paid in 2007. GE has more than $190 per-square-foot in place on the office park.

"Everybody assumes GE will buy it back for $1 more than whatever anyone bids," a second industry source said. "The question is, what percentage of the debt does it trade for?"