Boston Properties, Inc. (NYSE: BXP
) has entered into a binding sale agreement to sell a 45-percent interest in the ground leasehold interest and related tax credits in Times Square Tower, located at 7 Times Sq. in New York City.
An affiliate of Norges Bank is expected to pay $684 million in cash, and upon closing will enter into a joint venture with Boston Properties where the seller retains property management and leasing responsibilities at the building. The property is unencumbered by any debt.
Times Square Tower is a 48-story, 1.24 million-square-foot, class A office tower that was developed by Boston Properties with architect Skidmore, Owings & Merrill LLP in 2004 on half an acre in Manhattan's Penn Plaza / Garment District submarket, at the corner of W. 42nd St. and Broadway. The asset is currently 99 percent leased to multiple tenants, including Brown Rudnick, Pryor Cashman, Friedman Kaplan Seiler & Adelman, Manatt Phelps & Phillips, and ANN, Inc.
It is subject to a ground lease with The City of New York with 76 years remaining. The property benefits from a Payment in Lieu of Taxes (PILOT) program through June 2024, and the joint venture will hold contractual rights to purchase the fee interest in the property beginning in July 2024.
Boston Properties’ Executive Chairman, Mortimer B. Zuckerman, commented, "We are extremely pleased to form a new and important relationship with such a strong and reputable organization as Norges Bank, while at the same time once again demonstrating our ability to create and realize value for our shareholders through our development and management expertise."
Closing of this sale is subject to customary closing conditions. The fully-integrated, self-managed real estate investment trust expects, if the sale closes on these terms, to distribute at least the amount of proceeds necessary to avoid paying corporate-level tax on the gain realized from the sale.
Norwegian Government Pension Fund Global is a $665 billion pension fund that only recently has started investing on U.S. soil, following a law change by the government of Norway last December allowing it to invest outside of Europe. Norges Bank Investment Management said it could target up to $11 billion in the U.S.
Read CoStar News' coverage of the fund's first foray into the market HERE
, which included a similarly-structured deal with TIAA-CREF for assets in Boston, New York City and Washington, DC.