Boston Properties Inc. (BXP) agreed to sell a 45% interest in
three buildings in New York City and Boston to affiliates of
Norway's sovereign-wealth fund for $1.5 billion.
The deal with Norges Bank Investment Management involves stakes
in 601 Lexington Avenue in New York City, as well as the Atlantic
Wharf Office Building and 100 Federal Street in Boston. Each
building is at least 91% leased.
The agreement is another example of foreign investors getting
involved in U.S. commercial real estate. Increased demand from
overseas has helped drive U.S. commercial property values to high
levels, particularly in major cities favored by global firms.
Foreign buyers are seeking out the U.S. as a place to spend
their growing piles of cash, particularly as other markets such as
Europe remain weak. Non-U.S. buyers purchased more than $46 billion
of property in 2013, up from $35 billion in 2012 and the most since
2007, according to real-estate data firm Real Capital Analytics
Inc.
Last year, Boston Properties sold a 45% stake in the office
tower at 7 Times Square for $684 million to the Norwegian
Government Pension Fund Global. Boston Properties reported a $386
million profit on the sale.
In the latest deal, Boston Properties said it plans to
distribute at least the amount of proceeds necessary to avoid
paying a corporate-level tax on the gain realized from the
sale.
Boston Properties and affiliates of NBIM will form a joint
venture for each property upon closing, and Boston Properties will
retain property and leasing management for the ventures.
The Norwegian oil fund is the world's biggest sovereign-wealth
fund, and it was set up in the 1990s to act as the main investment
vehicle for Norway's vast oil wealth. It has expanded more than
tenfold in the past decade and is expected to be worth 7.278
trillion Norwegian kroner ($1.18 trillion) by 2020. It's managed by
NBIM, an arm of Norway's central bank.
To reach its ambitious real-estate growth targets, NBIM plans to
invest more than 1% of the fund's value in real estate each year
through 2016, equal to more than NOK50 billion. The fund's target
is that 5% of its cash should be held as real estate.
However, after three years of real-estate purchases, the fund's
real-estate portfolio is still stuck at only 1.2% of the total fund
value at the end of the second quarter, unchanged from the previous
quarter.
To boost that share, the fund had appointed a separate leader
group for real estate and announced plans to increase its staff to
600 from currently 398, mainly to handle the real-estate
growth.
NBIM holds stakes in office properties in the U.K., France, the
U.S., Germany and Switzerland, mainly through partnerships.
--Eliot Brown and Kjetil Malkenes Hovland contributed to this
article.
Write to George Stahl at george.stahl@wsj.com
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