One Lincoln fetches a towering $705m

Talk about good timing: The owners of One Lincoln Street doubled their money in a short time by selling the newly opened 36-floor office tower yesterday for $705 million.

Real estate executives said the $671 price per square foot is the highest ever paid for commercial real estate in Boston.

"The price we got is unheard of," said John B. Hynes III, managing partner and principal of Gale Co., an owner in the team that developed the tower, which opened last year and cost about $350 million to build.

American Financial Realty Trust said it bought the building because it fits into its portfolio. The company buys buildings already occupied by top financial institutions. In this case, State Street Corp. has a 20-year lease of the entire building, which will provide more than $1 billion in revenue over time.

In addition, American Financial Realty, based in Jenkintown, Pa., has achieved more geographic diversity by buying its first building in Boston.

"With this asset we'll be in 28 states and 80 cities," said Nicholas S. Schorsch, president and chief executive of American Financial Realty.

Real estate executives said the sale price per square foot easily surpasses the highest price paid previously, which was a little more than $400 per square foot.

Hynes said there were 12 bidders looking to own the latest addition to Boston's Financial District. American Financial Realty did not post the highest dollar bid. Others were slightly higher but "came in with terms that weren't satisfactory," said Hynes.

A major reason American Financial Trust was chosen is because the company is expected to be able to close the deal in two to three weeks, a relatively short time.

"Most people would believe the interest rate climate is on the climb, not decline," said Hynes. "The longer this deal takes to close, the more interest rate risk you're exposed to."

An agreement on the price and terms was reached Sunday, just before the kickoff of the Super Bowl, Hynes said. The announcement was made yesterday. The sale of the 1.05-million-square-foot tower near Chinatown is in a class by itself, professionals said.

"None of these other things that have traded have had a similar tenancy, in a building of similar quality and age, in this interest-rate environment," said Peter Joseph, a principal at Trammell Crow Co., a real estate firm.

Research from Trammell Crow, which was not involved in the transaction, shows the closest recent sale in price was 50 Milk St., which traded in 2002 for about $423 per square foot. One Federal St. sold in 2001 for $335 a square foot, and the John Hancock Tower and two related office buildings in the Back Bay went for just over $300 a square foot early last year.

The agent for One Lincoln's seller was the investment bank Morgan Stanley of New York. Gale Co. and Morgan Stanley together have about 42 percent of the equity in the building. State Teachers Retirement System of Ohio holds another 42 percent or so. And Columbia Plaza Associates, a group that was designated as the developer of the site in the 1980s, owns the remaining share.

One Lincoln is formally known as State Street Financial Center. The purchase includes a 900-car, five-floor underground garage. The tower was designed by Jung/

Brannen Associates Inc. of Boston."It's a great asset with stellar credit and a 20-year lease, " Joseph said. "In this interest-rate environment, you can make these deals work." The State Street lease was apparently the key.

"All investors of property of this size recognize the long-term value of owning a piece of property in the Financial District of Boston," Joseph said.

"When you add a brand-new building and the credit of State Street, that explains why they had so much interest and why the price is so high."

As of the end of the third quarter of 2003, American Financial Realty owned about 600 properties in the United States totaling some 16.5 million square feet. Total annual rent was about $172 million, and investments in real estate totaled $1.6 billion.

Hannah Grove, a senior vice president at State Street, which had made an early bid to buy the building, said, "We're pleased the long-term ownership of the building is close to being resolved."

Thomas C. Palmer Jr. can be reached at tpalmer@globe.com.