Tufts Health Plan pays $85.5m for Watertown headquarters
Tufts Health Plan yesterday said it bought its landmark headquarters building at 705 Mt. Auburn St. in Watertown for $85.5 million from Prospectus Inc.
The Art Deco structure was built in 1931 as a service center for Western Electric.
Tufts has leased space in it since 1998, and this year said it was consolidating its offices and moving 475 employees from Waltham to Watertown.
"Buying this building signals our long-term commitment to the marketplace," said James Roosevelt Jr., chief executive of Tufts Health Plan, in a statement. "This purchase will provide us with millions of dollars of savings over the next several years, which will enable us to further lower administrative costs."
Tufts's purchase bucks the pattern of recent corporate transactions.
As property prices have appreciated in recent years, many companies have sold real estate. Often, they have continued to occupy the space they sold in what is known as a sale and leaseback.
"This is definitely moving against the trend, particularly in a market environment where property has been bid up pretty aggressively," said Kevin McCall, chief executive of Paradigm Properties LLC, a Boston owner and manager of commercial real estate. "Many companies are selling real estate now, not buying it."
The trend has also been evident among companies with sizeable real estate holdings, such as retail chains, said McCall. Some found they could earn a significantly better return by selling their real estate and putting the capital to work in their core businesses.
But the purchase could work to Tufts's benefit in part because of its nonprofit status, which exempts the insurer from local real estate taxes.
"If this is their core real estate, a nonprofit institution is oftentimes better off owning than leasing," said Tom Hynes, president of Meredith & Grew/Oncor, a full-service commercial real estate firm.
The move is a show of strength for Tufts, which has been in a turnaround mode since Roosevelt became CEO in June 2005.
Membership, which had been falling for years, stabilized last year. The health plan, the third-largest in the state, is now posting significant membership growth.
On March 31, Tufts had 635,000 members, up from a low of about 600,000 last year.
Between the fourth quarter of 2006 and the first quarter of 2007, Tufts Associated HMO added about 18,000 members, the largest enrollment gain of any health plan statewide, according to a report by the Massachusetts Association of Health Plans.
The Tufts building is about 500,000 square feet. Parts of it are leased by Mount Auburn Hospital and the United States Postal Service.
Jeffrey Krasner can be reached at krasner@globe.com. 
