Starwood Lending Arm Trying to Flip Back Bay Office

Two months after acquiring the property at auction, LNR Partners is looking to flip a Back Bay office building with redevelopment potential.

The lending arm of Starwood Property Trust is marketing the Park Square Building at 31 St. James Avenue in the Boston neighborhood, Bisnow reported. The Barry Sternlicht subsidiary tapped Eastdil Secured to help with the process.

Marketing materials refer to the 503,000-square-foot property as one “with significant redevelopment potential.” The listing also points to “embedded optionality” and “the ability to execute a strategic repositioning or pursue a transformative mixed-use redevelopment.”

A redevelopment of the 11-story building would likely require the remaining office tenants to exit, but that could happen naturally in just a few years. The building is only 35.8 percent leased, according to marketing materials, and the weighted average remaining lease term is less than four years.

LNR purchased the building in March for $95 million; it was the lender to the building’s previous owner, New York-based Capital Properties.

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 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 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. The building has lost prominent tenants in recent years, including WeWork in 2022 and Bay State College in 2023.

Office-to-residential conversions are an increasingly prominent part of the Boston office market due to a city program that expedites projects and provides up to 75 percent in tax abatements. Last week, the Boston Planning & Development Agency approved four conversions in the city.

— Holden Walter-Warner