Boston Properties secures sovereign wealth funds and pension funds to fuel office buyouts

Posted on 07/14/2021

Boston Properties, Inc. is the largest developer, owner and manager of publicly traded Class A office properties in the United States.

The Canada Pension Plan Investment Board (CPP Investments) and GIC Private Limited are part of a new co-investment program with Boston Properties for future acquisitions of office properties in the United States. Through the program, the partners intend to selectively acquire and operate office properties in BXP’s core markets – Boston, Los Angeles, New York, San Francisco and Washington, DC, as well as Seattle.

The partners have targeted a total of US$1 billion in equity for the program, with Boston Properties and CPP Investments each allocating US$250 million and GIC allocating US$500 million. The partnership plans to use leverage allowing an initial investment capacity of approximately US$2 billion. With these capital commitments, Boston Properties expects to be able to accelerate the pace at which it can pursue acquisition opportunities and expand its investment capacity.

Under the terms of the agreement, over the next two years, Boston Properties will provide CPP Investments and GIC with first exclusive offers to form joint ventures with Boston Properties to invest in acquisition opportunities that meet the criteria for investment targets of the program, subject to certain exclusions (including higher development). Boston Properties will act as general partner and provide customary property management, leasing and other services.

CPP Investments, which does not have a massive real estate program like its peers CDPQ, BCI and OMERS, is finding partners to allocate capital to global properties. CPP Investments is banking on the fact that employers in major global cities continue to seek the best office environments that will attract and retain talent. GIC is also betting that “big companies” need collaborative workspaces to grow their culture, innovate and win the war for talent.

This co-investment program is consistent with Boston Properties’ ongoing strategy to create value through opportunistic investments in high-quality office properties in markets with the strongest economic growth over time, while maintaining a strong balance sheet and modest leverage.

To advise
Hodes Weill & Associates acted as exclusive advisor to Boston Properties on this co-investment program.

Keywords: Boston Properties (NYSE: BXP).