Starwood Lending Arm Wins Auction for Back Bay Office

Starwood Property Trust picked up a piece of Boston’s Back Bay office market.

LNR Partners, the lending subsidiary of Barry Sternlicht’s firm, purchased the Park Square Building at 31 St. James Avenue at auction for $95 million, the Boston Business Journal reported. LNR was the lender to the building’s previous owner, New York-based Capital Properties.

The acquisition works out to a little more than $175 per square foot.

The property was in distress, prompting the move of a $160 million loan to special servicing in 2024. LNR was chosen as the special servicer as the debt neared imminent default, replacing Bank of America as the lender after the latter issued the mortgage in 2017. It was due to mature in November 2027.

Capital Properties bought the building in 1997 for $57 million. It was most recently assessed at $119 million.

Tenants at the 11-story, 540,000-square-foot property include the School of Fashion Design, Colombia and Portugal’s consulates, as well as retailers Roche Bobois, Club Pilates, Bacco’s Wine & Cheese and the Fire+Ice restaurant. But the building has lost prominent tenants in recent years, including WeWork in 2022 and Bay State College in 2023.

The sale doesn’t represent an exit from the market for Capital Properties, which still owns 133 Federal Street, 360 Newbury Street and a property on Long Wharf.

Last month, LNR filed a $167 million complaint against a joint venture of Rubin Schron’s Cammeby’s International and David Lowenfeld’s World Wide Group to foreclose on a 23-story office building at 300 South Riverside Plaza in Chicago. LNR is also playing the role of special servicer there.

In the third quarter, Boston’s office market experienced its strongest three-month period since 2019 with nearly 1.9 million square feet of deals signed, primarily driven by large commitments in the central business district.

— Holden Walter-Warner