Normandy makes second purchase via third fund

Morristown, New Jersey-based Normandy Real Estate Partners is continuing to buy assets at a rapid clip on behalf of its current value-added real estate vehicle, purchasing its second asset through Normandy Real Estate Fund III. 

Normandy managing principal and co-founder David Welsh confirmed the purchase of the Central Square portfolio, a six-building, 130,119-square-foot office park located along Massachusetts Avenue in Cambridge, Massachusetts. The asset, situated near the Massachusetts Institute of Technology, currently has only one tenant – laboratory services provider Quest Diagnostic, which has occupied the buildings for more than 15 years. Although Welsh declined to comment on the closing price, data provider Real Capital Analytics lists it as $34.7 million.

With Quest planning to vacate the buildings in late 2015, combined with the approaching fiscal cliff in December 2012, the prior owner of the portfolio—a family realty trust that had owned the properties for decades—wanted to sell the assets, and fast. The result was a compressed sales process in which the transaction opened and closed within the span of a month.

Once Quest exits the space, Normandy plans to redevelop the property into a mixed-use asset, including retail, multifamily and office space. “Quest’s lease expires in November 2015,” said Welsh. “They recently signed a new lease to relocate outside of Cambridge, so that presents a great opportunity to redevelop the properties.”

Normandy brought in Twining Properties, a real estate firm run by Alex Twining (a former colleague of Welsh’s when they both worked at Morgan Stanley), to help manage the asset. Although financial details of the partnership were not disclosed, Normandy confirmed that it was providing the “majority of the capital.”

“Between our office expertise and Twining’s relationships in Cambridge and knowledge of the region, it makes for a good team,” Welsh added.

Although Welsh also declined to comment on any of the firm’s fundraising activities, sources familiar with the matter have told PERE that this purchase is the second investment on behalf of Normandy Real Estate Fund III. The value-added vehicle, which is seeking $300 million to $400 million in equity commitments, is targeting US office properties, primarily in New York, Boston and Washington DC. The firm made its first investment on behalf of the fund last year via the acquisition of 575 Lexington Avenue from the California State Teachers’ Retirement System and developer Larry Silverstein.
 
Fund III held a first close on $150 million in equity in the fall. PERE understands that a second close is expected shortly.

Formed in 2002, Normandy is led by Welsh, Finn Wentworth and Jeffrey Gronning. The firm's previous vehicle, Normandy Real Estate Fund II, was launched in 2007 and closed on $350 million in total commitments, according to the firm's website.

To read PERE’s Blueprint interview with the principals of Normandy, click here.