This Downtown Crossing building just sold for one-fifth of its pre-pandemic price. Here's why that may be a good thing.

Boston Globe

31-03-2025

The old Barnes & Noble in Downtown Crossing has sat vacant for nearly two decades. Here, it's pictured on March 6, 2006.
David L. Ryan/Globe Staff
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399 Washington was family-owned for decades, until 2017 when Chicago-based LaSalle Investment Management and L3 Capital bought it for $63 million. They then invested millions more into a full suite of upgrades: working bathrooms and elevators, new mechanical and HVAC systems. They stripped off the two-story gray slab that hung over the building's entrance for years, replacing it with tall expanses of metal and glass windows. The owners started marketing the retail space shortly after buying the building, and completed upgrades in 2021.
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But tenants never came. And earlier this year, with office demand still weak following the COVID-19 pandemic — and no rental income coming in — 399 Washington
The prospect of a freshly overhauled building at a big discount drew interest from several investors — including
bid by Hudson and Assembly won. Now they plan to
market the property at rents in the $40s per square foot, $7 to $10 less than the typical rent for Class B office space downtown, and around $20 less than what the prior owners would have had to charge, Papanastasiou said. Bringing in a ground-floor retailer, and resetting rents for offices up above, will bring an energy to the property that hasn't been seen in decades, the new owners said.
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'That will cast a wide net for tenancy,' Papanastasiou said. 'Just lighting up this building is going to help tremendously.'
The ground floor of 399 Washington Street in Downtown Crossing has been vacant since a Barnes & Noble store there closed in 2006.
Jonathan Wiggs/Globe Staff/Boston Globe
Ron and Papanastasiou aren't alone. Amid a
One such opportunistic investor is Broder, a Boston-based real estate investment and development firm that recently bought 15 Broad St. downtown. It's Broder's second time owning the building, which it sold to Brookfield Properties in 2016 for $32.5 million. In late 2019, just a few months before COVID hit Boston, Brookfield sold it to TA Realty for $46.1 million. Earlier this year, Broder bought it back, for $13.5 million — $5 million less than it first paid to buy it 18 years ago.
Broder is privately funded with family wealth, and its portfolio has little debt, said managing partner Eric Svenson. (His and brother Ben Svenson's father, John Svenson,
These days, groups that bought buildings prior to the pandemic and with a five- or seven-year mortgage find themselves with
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'A lot of sellers are feeling like it's time,' he said. 'I wish we had ten times the available capital we have. … I've been doing this for three decades and I've never seen opportunities like this.'
Properties like 15 Broad St. and 399 Washington St. that have changed hands for significant discounts can give landlords flexibility to offer tenants space for a discount, or invest in modern amenities — a crucial factor in today's leasing landscape, said Wil Catlin, a senior partner with Boston Realty Advisors. But these days, Catlin noted,
many tenants consider offices more an asset than a requirement, and they prize amenities and places for employees to connect with peers. So while pricing is important, it's not the only consideration.
One of the last remnants of the Barnes & Noble store that once occupied the bottom two floors of 399 Washington Street.
Jonathan Wiggs/Globe Staff/Boston Globe
'The question is pricing
for what
?
'
Catlin said. 'For a lack of a better term, it's got to feel good. You've got to want to be there. If the owner is saying they get a $7 per square foot discount, and the employees and staff are not getting a differential experience, they're like: 'Uh, why are we here again?''
Catlin and other experts expect more deals like this as sales activity increases this year after a long slow period since COVID-19. Some of those sales will come as deep-pocketed global real estate owners pivot away from commercial real estate in an effort to curb future losses.
Private equity behemoth Blackstone in 2023 told the Globe it would continue to pare back its office holdings. It paid around $156 million in January 2020 for a five-story brick-and-beam office at 179 Lincoln St. Last March, Blackstone handed both the building — and its $76.5 million in mortgage debt — over to Synergy Investments, according to Suffolk County records.
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Meanwhile Swiss bank UBS Group has been shedding office properties across the United States. In September, a UBS arm sold 400 Atlantic Ave., a six-story brick office facing Boston Harbor, for $30 million to the development arm of French financier Jacques Chahine, Suffolk County records show.
That's 40 percent less than the $50 million UBS paid to buy 400 Atlantic in 2014, and followed
Over in Downtown Crossing, Papanastasiou and Ron said they're already in advanced conversations with several retailers to lease 399 Washington's
expansive first and second floor, which are connected by a striking brass staircase — a remnant of the Barnes & Noble days. They aim to sign an office lease soon for one of the upper floors. A fully built out office suite on the fourth floor, for example, is ready for a tenant any day.
'We're confident we can lease that to an office tenant this year,' Ron said. 'We're bullish on the future of downtown, and on this building.'
The new owners of 399 Washington Street in Downtown Crossing are hoping to lure a new anchor tenant to its two-story retail space.
Jonathan Wiggs/Globe Staff/Boston Globe
Catherine Carlock can be reached at