The Real Deal New York

Boston Properties to market more trophy assets in 2014

CEO says private capital for real estate deals remains "plentiful"

January 30, 2014 08:30AM
By Hiten Samtani

From left: 250 West 55th Street, Mort Zuckerman and Times Square Tower at 7 Times Square

From left: 250 West 55th Street, Mort Zuckerman and Times Square Tower at 7 Times Square

Given the robust capital markets environment, Boston Properties will continue to market trophy assets — such as Times Square Tower — for sale or recapitalization in 2014, executives for the real estate investment trust said yesterday.

President Doug Linde, speaking from Boston during the company’s fourth-quarter earnings call, said that the REIT had been successful at filling buildings such as Times Square Tower and 125 West 55th Street with top-drawer, long-term tenants that provided “really terrific long-term contractual cash flows.”

In October, the REIT sold a 45 percent stake in Times Square Tower for $684 million. The towers, Linde said, were “just an ideal mechanism for harvesting” given the strong demand for trophy assets, according to a transcript of the call provided by Seeking Alpha.

Boston Properties’ Funds from Operations for the fourth quarter of 2013 stood at $197.6 million, a year-over-year increase of 2.6 percent from $192.5 million in the fourth quarter of 2012. Net income available to common shareholders was $88.7 million in the fourth quarter, a year-over-year increase of $23.3 million from $65.4 million in the fourth quarter of 2012.

CEO Owen Thomas characterized the interest rate increases in the fourth quarter as “fairly benign” and said that finding private capital for real estate deals remained “plentiful.” Thomas also introduced former CBRE broker John Powers, who took over in January as head of the firm’s New York operations. Powers replaced Robert Selsam, a 33-year veteran of the company.

“My ramp-up has been very quick and I’m now fully engaged with every aspect of our operations,” said Powers, who had helped Boston Properties design and lease its 1 million-square-foot tower at 250 West 55th Street during his tenure with CBRE.

Boston Properties management also said that it was actively on the prowl for development opportunities in the city, especially those that would cater to the technology and media tenants that have dominated leasing activity in Manhattan over the past few quarters. It was possible, Linde said, that the REIT would look beyond its traditional Midtown stronghold, including locations in Midtown South and Downtown.

On the leasing front, Linde pointed to highlights such as the 95,000-square-foot deal with billionaire George Soros’ investment firm at 250 West 55th Street. Another 175,000 square feet of deals were in the pipeline at that building, Linde noted. If they were completed, Linde said the building would be about 75 percent leased – though it was unlikely it would hit its target of being 90 percent leased by the end of 2014.

Linde also noted the comeback of trophy leasing deals – those in which rents were north of $100 per square foot. In 2013, he said the market saw 54 trophy deals for a total of 760,000 square feet, a big jump from 2012’s 38 deals for 550,000 square feet. That’s still a far cry from the 2008 high of 105 deals for almost 2.5 million square feet.

In response to a question about how Mayor Bill de Blasio’s push to raise property taxes would affect the industry, Mortimer Zuckerman, who stepped down as CEO of the REIT last year but remains chairman, said that the tax hike wouldn’t be anything dramatic.

“I think it [the increase] has been narrowed by the — shall we say, the experience that the mayor has had with the governor on these issues and not to be able to go too far,” Zuckerman said.

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