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Hancock Tower back on market

Sold at auction just a year ago, Hub icon is now a hot property

The John Hancock Tower’s high occupancy rate adds to its value. The John Hancock Tower’s high occupancy rate adds to its value. (Boston Globe File 2006)
By Casey Ross
Globe Staff / June 15, 2010

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After scoring a marquee tenant, the owners of the John Hancock Tower are looking to sell a large stake in the signature Back Bay building to capitalize on surging demand for trophy office properties.

The Hancock’s joint-venture owners, Normandy Real Estate Partners and Five Mile Capital Partners, will begin advertising the building today, about 15 months after they purchased it at a foreclosure auction as the commercial real estate market neared a low point in spring 2009, according to the firm brokering the sale.

The partial sale comes as the market begins to recover, with companies snapping up office space that was vacated during the downturn. Normandy and Five Mile scored one of the largest deals in recent months, leasing seven floors of the Hancock to the investment firm Bain Capital, whose relocation will make the 62-story building almost fully occupied.

High occupancy translates to increasing rents, a trend that should attract buyers.

“The Back Bay is the hottest market in the Greater Boston area by far right now,’’ said Gil Dailey, an executive director at the real estate services firm Cushman & Wakefield, which is marketing the partial sale. “There is clear demand for Class A product.’’

Robert Griffin, New England region president for Cushman, said Normandy and Five Mile are looking to recapitalize their investment in the Hancock tower by selling anywhere from 50 to 90 percent ownership. The firms, which bought the building in 2009 for about $660 million, put its overall value today between $925 million and $950 million. Normandy and Five Mile will keep an ownership stake and continue to manage the building, Griffin said. The money is intended to repay the owners for some of their purchase and to help lower their borrowing costs.

Executives with Normandy and Five Mile declined to comment yesterday.

The partnership has invested about $50 million to upgrade the Hancock, including renovating the lobby and constructing a new cafe and underground parking garage. The owners have also increased the building’s level of environmental certification.

The tower, the city’s tallest and best-known building, is among a highly sought-after class of properties in the current market. Industry specialists say domestic and international investors are looking to put money in top-rated buildings that are still seen as bargains.

While no building on par with the Hancock has sold in Boston recently, some smaller properties have attracted great interest. The sale of One Brigham Circle, an office and retail complex in the Longwood Medical Area, drew interest from dozens of parties before being purchased by AEW Capital Management for $97 million, nearly 8 percent more than brokers had predicted.

Sales of top-rated buildings in other cities are also becoming more competitive. In Washington D.C., 1101 Pennsylvania Ave., known as the Evening Star building, attracted a flurry of bidders, as did the sale of a stake in 340 Madison Ave. in New York, which is going for $687 per square foot. The Hancock stake is expected to sell for at least $450 per square foot.

While dragged through a high-profile foreclosure last year, the Hancock still remains home to a roster of big name companies.

Among its tenants are Ernst & Young, State Street Corp., Arrowstreet Capital, and the Swiss financial giant UBS.

Casey Ross can be reached at cross@globe.com.