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Q & A: Hamilton Co.’ s Carl Valeri on apartment living in Downtown Crossing and the future of Hub rents

Carl Valeri, the president and COO of the Hamilton Co., is feeling pretty good about the Allston company’s latest project: Hamilton Crossing at the corner of Washington and Winter streets in Downtown Crossing.

The former 12-story office building across from Macy’s that Harold Brown bought in 1987 for $6.5 million has undergone an $8.5 million transformation into 48 mid-priced apartments.

Opening in a few weeks, the studios, one- and two-bedroom apartments — ranging in size from 450 to 750 square feet and priced from $1,700 to $3,000 — and are almost fully leased. The units feature bamboo floors, stainless appliances, central heat and a/c for each unit, floor-to-ceiling windows, Silestone countertops and laundry on each floor. Valeri talked with real estate editor Thomas Grillo about why he switched from office to apartments, whether Boston can absorb more than 6,000 apartments in the pipeline and where rents are headed.

BBJ: The Hamilton Co. has owned 8 Winter St. since the 80s as an office building. Why the switch to apartments?

CA: Office space in Boston has gone upscale and it has moved from the Financial District to the Seaport so it’s no surprise that there is less demand for Class B space like this. In the early 2000s, we were getting more than $30 per square foot for this building and three years ago we were getting just $20. Despite what’s happening at the Filene’s site, the growth in the student population from Suffolk, Emerson and Tufts, and an increase in the adult population, has created more of a 24-hour feel to Downtown Crossing. It became clear to us that we could rent this space for more as apartments.

BBJ: Were you worried about getting these apartments leased with the Kensington set to open just down the street?

CA: No. We didn’t pay $10 million for the building more than 20 years ago, so we had a lower basis. We did the renovation work in-house and we are at the lower end of the price range than the Kensington and thousands of other units coming online. We don’t have a concierge, parking and other amenities, but the price we offer appeals to a much wider audience than the other luxury buildings where studios start at $3,000.

BBJ: Who is leasing your units?

CV: Young professionals, corporate clients and students. We leased half of the building to one company.

BBJ: Given the lack of inventory for condominiums downtown, did you ever consider converting the offices to condos?

CV: No. We are long-term holders of apartments. Plus, we are not sure how much the condo market has recovered. We like apartments. We now own 5,000 units and are the largest privately-owned landlord in the city.

BBJ: There are thousands of units in the pipeline nearby including the Kensington and AvalonBay’s project on Stuart Street, not to mention the units in Seaport. Will those buildings get filled?

CV: They will get filled given the demand, but they won’t be able to grow the rents. I would not want to be forging ahead with thousands of units that cost $500,000 each and expecting to get sky high rents. I’m not sure how wide that demographic is.

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