Boston Properties, Canada Pension Plan Investment Board (CPP) and GIC have established a co-investment program for future acquisitions of office properties in the US, an initiative that Boston Properties CEO Owen Thomas first mentioned during the REIT’s Q1 earnings call.
The partners intend to acquire and operate office properties in Boston Properties’ core markets—Boston, Los Angeles, New York, San Francisco and Washington, DC, as well as Seattle.
The companies are allocating an aggregate of $1 billion of equity to the program, with Boston Properties and CPP Investments contributing $250 million, while GIC is kicking in $500 million. With leverage, the investment capacity will total $2 billion.
“This new co-investment program underscores the attractiveness of Class A office investment opportunities in our markets and Boston Properties’ track record of creating long-term value at the property level,” Thomas said in a statement.
Over the next two years, Boston Properties will provide CPP Investments and GIC with exclusive first offers to form joint ventures to invest in acquisition opportunities that meet the target investment criteria of the program, subject to certain exclusions such as ground-up development. In addition, as the general partner, Boston Properties will provide customary property management, leasing and other services.
The partners don’t seem to be fazed by the uncertainty injected into the office asset class by the WFH trend.
“Employers in top global cities continue to seek best-in-class office environments that will attract and retain talent,” said Peter Ballon, managing director, global head of real estate, CPP Investments, said in a prepared statement.
Indeed, a report from Reonomy earlier this month shows that in some cases, investment in the top 20 US markets increased year-over-year, despite the pandemic and more liberal WFH policies pushing some workers to the suburbs. Last year, institutional investors allocated proportionally more of their investment dollars to office assets in big cities: while they bought 4% less than the previous year, they paid 12% more on average per square foot. This suggests institutional investors “do not view remote work as a long-term threat to office values,” according to Reonomy’s report.