Boston Properties Sells Interest in Office Buildings to Norges Bank for $1.5B

By Gail Kalinoski, Contributing Editor

Boston Properties has agreed to sell 45 percent interest in three East Coast office buildings to affiliates of Norges Bank Investment Management for $1.5 billion in cash as Norway’s sovereign wealth fund continues picking up prime office assets in the United States.

The REIT, one of the largest owners, managers and developers of office properties in the United States, said it will form a joint venture with NBIM for each property at closing. Boston Properties will retain property and leasing management for each of the buildings – 601 Lexington Ave. in Manhattan, the Atlantic Wharf Office Building and 100 Federal St., both in Boston.

“We are delighted to expand our very important relationship with Norges Bank Investment Management, a leading global investor, through this partnership on three of our high-quality assets in New York and Boston,” Boston Properties CEO Owen Thomas said in a statement. “This transaction represents an important step in executing our current strategy of recycling capital from existing assets into new development.”

Boston Properties has owned 601 Lexington Ave., which it purchased in 2001 from Citibank, for the longest time of the three office buildings. The 1.7 million-square-foot, Class A office complex previously known as Citicorp Center was completed in 1977 as the headquarters of Citibank. It is located at East 53^rd Street and Lexington Avenue in midtown Manhattan and consists of a 59-story tower and a six-story office and retail building. The complex is 99 percent leased. The REIT said the JV may redevelop and reposition the low-rise building in the future.

The Boston-based office REIT developed the Atlantic Wharf Office Building, a 31-story, 791,000-square-foot, Class A tower on Boston’s Waterfront in 2011. The fully leased building is LEED Platinum certified and has frontage on the Rose Kennedy Greenway and Boston Harbor.

Boston Properties acquired 100 Federal St., a 37-story, 1.3 million-square-foot office tower in the Financial District, in 2012. It is 91 percent leased and occupies an entire block. The joint venture is considering redeveloping the plaza and lower level spaces, according to a Boston Properties release.

NBIM also owns a 45 percent stake in another Boston Properties asset – Times Square Tower,  a Class A,  47-story, 1.24 million-square-foot office building located at 7 Times Square between 41^st and 42^nd streets. The REIT sold the stake to NBIM in September 2013 for $684 million.

The Norwegian fund, the world’s largest with assets estimated at $878 billion, has been on a spending spree in the U.S, most recently agreeing to buy a 49.9 percent stake in the Orrick Building in San Francisco with TIAA-CREF, according to Bloomberg News.

In December, NBIM and MetLife Inc. teamed up on a joint venture to invest in Class A office properties in the U.S. Its first purchase was One Financial Center in Boston. A month later, the JV announced office acquisitions in San Francisco and Washington, D.C. In July, MetLife and NBIM bought One Beacon St., a Class A, 34-story office tower in Boston’s financial district, for $561 million. NBIM owns a 47.5 percent stake in the building.