REIT Plans To Start Construction Right Away On New Office Tower In Hottest U.S. Office Market
After hinting on its recent quarterly conference call that it was close to wrapping up a new development site in downtown San Francisco, Boston Properties, Inc. (NYSE:BXP
) made good on its promise. Late Wednesday, the REIT announced it had acquired a prime office developement site in the city's South Financial submarket at 535 Mission Street for $71 million in cash, buying the land from fellow Boston-based firm Beacon Capital Partners.
Jones Lang LaSalle had marketed the site.
Boston Properties said it will kick off construction almost immediately on a 27-story, 307,000-square-foot spec office tower at a total budgeted cost of approximately $215 million.
The site commanded a top price for several unique reasons. First, it is fully permitted, allowing construction to commenceright away, a rarity for such a large development project in downtown San Francisco.
Also, with plans to qualify for a LEED Gold certification, this project is participating in San Francisco's LEED Gold priority permitting process, which provides expedited permit reviews in the San Francisco Planning Department, Department of Building Inspection, and Department of Public Works for any building with a goal of LEED Gold or higher.
Secondly, the purchase price includes work completed and building materials purchased by Beacon Capital, which reportedly include the steel for erecting the building and its glass curtainwall exterior. According to reports, Beacon planned to build the office tower before the recession forced it to stop construction after nearly completing work on the new building's foundation.
While the 535 Mission St. project provides Boston Properties with a 'quick hitter' to add new office space in the hottest U.S. office market, the REIT is also pursuing development of the massive Transbay Tower, a 1.4 million-square-foot, 61-story behemoth planned next to the city's Transbay Transit Center.
Boston Properties and Hines have teamed up to tackle the massive development project after acquiring the site from the Transbay Joint Powers Authority for approximately $190 million in a sale expected to close in the first quarter of 2013.
The San Francisco Planning Commission granted final planning approval for the tower to proceed last October. As designed by Pelli Clarke Pelli Architects, Transbay Tower will be tallest building on the West Coast, soaring to 1,070 feet.
At present, only one major office building is under construction in San Francisco -- Tishman Speyer's Foundry Square III, a 286,375-square-foot structure at 505 Howard St. No tenents have yet been signed to lease space in that building. But it appears office tenants in the market for new space will soon have more options.
Boston Properties has just over 5 million square feet in its San Francisco portfolio. In addition to its four Embarcadero Center office towers and three-building Gateway Commons complex, the REIT has a pair of properties in San Jose, CA.