Can’t fuggedaboutit: Boston Properties bullish on Brooklyn

REIT considering more development in wake of Navy Yard project

TRD New York /
Jul.July 30, 2015 05:20 PM

Boston Properties may ramp up its investments in Brooklyn in the wake of its latest development deal at the Navy Yard, chief executive Owen Thomas told investors in an earnings call Thursday.

“We think that the Dock 72 investment could lead to additional development opportunities for Boston Properties at the Brooklyn Navy Yard and in Brooklyn more broadly,” Thomas said, referring to the 675,000-square-foot office building Boston Properties is developing in a 50/50 partnership with Rudin Management.

“If you look at what’s happening in Brooklyn today in terms of rent growth and the transit avoidance it provides, we think it’s going to reflect tremendous growth for us in the future,” Thomas added.

The two companies had announced the project, which will feature shared-office company WeWork as an anchor tenant, on July 6. On the call Thursday, Thomas dished out additional details. He said the building will cost $410 million – higher than the $380 million previously reported – and is scheduled to be be ready for occupancy in the first half of 2018. Boston Properties chair Mort Zuckerman is an investor in WeWork.

Thomas also reckons the company can lease out the entire building at $60 per square foot, which would translate to an unleveraged net operating income in excess of the 7 percent the firm had targeted.

Unsurprisingly, WeWork is getting favorable terms for leasing a third of the building as an anchor tenant, but Boston Properties revealed that the firm has contract options to take up more space in the building on more regular terms. The companies and the Navy Yard are planning to jointly run two shuttle services to nearby subway stations on the G, F and A/C lines in an attempt to make up for the complex’s poor transit connectivity.

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