By Greg Turner | The Boston Herald | August 6, 2012
Former basketball star Earvin “Magic” Johnson’s investment in a Charlestown housing project turned out to be no slam dunk.
The Los Angeles Lakers legend’s development team dumped Mezzo Design Lofts, a 146-unit complex built adjacent to Interstate 93 five years ago, for $45.7 million last week — well below its $54 million project cost.
Canyon-Johnson Urban Funds, a joint venture between Johnson and L.A.-based Canyon Capital Realty Advisors, sold the 30 Caldwell St. site to John Hancock Life Insurance Co.
The sale price surprised real estate experts, who say there’s strong demand from investors for multifamily complexes at a time of limited apartment supplies and skyrocketing rents.
“It’s probably more an outlier than the norm for apartment building values right now,” said Michael DiMella, a managing partner of Charlesgate Realty Group in Boston. “It could be a locational abnormality more than anything else, than a sign of the market.”
Mezzo was built by the elevated highway on the far western side of Charlestown near the Sullivan Square MBTA station. DiMella called it a “nice product” but perhaps “not the first-choice location” among apartment seekers comparing it with rentals in downtown Boston and Cambridge.
After retiring from the NBA in the 1990s, Johnson became a successful businessman investing in real estate, restaurants and movie theaters. The 52-year-old made a splash in March when he, Stan Kasten and Guggenheim Partners dropped $2 billion on the Los Angeles Dodgers, buying the team from former Boston parking lot magnate Frank McCourt.
Back in September 2007, Johnson came to Charlestown to join local partner Cathartes Private Investments in pulling the wraps off Mezzo’s loft-style condos priced in the $300,000 to $600,000 range. It was the basketball legend’s first project in the Boston area.
But within weeks the project switched to rentals as the real estate market softened and the economy went south. The Great Recession officially began in December 2007.
“Obviously it was happening through some pretty tough years,” a spokesperson for Canyon-Johnson said. “Relatively speaking, their loss wasn’t significant. This is a project they are proud of.”
Canyon-Johnson remains committed to NorthPoint, a $2 billion mixed-used project between Boston and Cambridge, according to Thomas O’Brien, managing director of HYM Investment Group, a co-developer with New York’s Atlas Capital.
John Hancock will fold Mezzo Design Lofts into its $8.2 billion real estate portfolio that includes residential, retail, office and industrial properties.
“Mezzo Design Lofts is a great addition to our established and growing real estate portfolio,” said Tina Acranis, a spokeswoman at John Hancock parent Manulife in Toronto.
Barry Bluestone, a Northeastern University dean and expert on urban development, said the housing market is “stabilizing and strengthening,” and developers who converted condos to rentals during the recession are “getting reasonable rents” these days.
“I’m a little surprised, not knowing the financials, that (Canyon-Johnson) would sell at this point at a loss,” Bluestone said. “My impression is, if they could have held on a little longer, they could have sold at a price closer to what they invested in it.”