Boston Properties Inc.
) finally inked a deal to sell its 45% stake in the Times Square
Tower in Manhattan for $684 million in cash to The Norwegian
Government Pension Fund Global. The tower was put up for sale in
June by Boston Properties.
The Pension Fund, which is the world's largest oil-backed
sovereign wealth fund, will form a joint venture (JV) upon
closure with Boston Properties, whereby the latter will retain
55% stake and property and leasing management on behalf of the
JV. Signed on Sep 6, the deal is expected to close within 90
Mostly occupied, the Times Square Tower, a 47-story, 1.2
million-square-foot, Class A office tower including associated
retail space and signage, enjoys an enviable location in the
popular shopping district. With Times Square being New York's
greatest transportation hub with easy access to several bus,
subway, and rail lines, the property is valued at $1.52 billion.
Its tenant roaster includes several law firms, restaurant chains
and clothing retailer,
Developed in 2004, the tower is built on a ground that is leased
from The City of New York and has a remaining term of 76 years.
Notably, the JV enjoys the right to purchase the fee interest in
the property beginning July 2024.
Currently, there is sufficient impetus for such prized properties
in this region. This is well evident from the June sale of 40%
stake in New York's General Motors Building, to the families of
Chinese property developer Zhang Xin and Brazil's banking tycoon
Safra, in a deal that valued the property at around $3.4 billion.
Also, in June, Carlyle Group agreed to dispose an office and
retail tower at 650 Madison Avenue for $1.3 billion, nearly
double the amount paid for it five years back. Such deals reflect
the demand for these premium retail and office properties in the
A Strategic Fit
Rise in rents and the value of such properties in the area are
attractive and, hence, the value recognition of its asset through
the sale by Boston Properties is a strategic fit. Moreover, the
company plans to distribute at least the amount of proceeds
required to escape the payment of a corporate level tax on any
gain recognized from the sale, thereby keeping the investors
upbeat on this deal.
On the other hand, for Norway's oil-backed sovereign wealth fund,
which already forayed into the U.S. real-estate market earlier
this year, the deal will help extend its presence further. The
fund, which committed 5% for real-estate buyouts, also grabbed
opportunistic property purchases in Europe and other markets.
Boston Properties moved up 0.94% in yesterday's regular trading
session on the New York Stock Exchange. The stock currently holds
a Zacks Rank #3 (Hold). Other REITs that are performing better
and deserve a look include
Highwoods Properties Inc.
SL Green Realty Corp.
), both carrying a Zacks Rank #2 (Buy).
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