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Boston Properties (BXP) Expands in Seattle, Acquires Safeco Plaza

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In an attempt to enter the Seattle market, Boston Properties, Inc. (BXP - Free Report) completed the acquisition of Safeco Plaza. The LEED-Platinum certified Class A office property is a 50-story building spanning 800,000 million square feet.

Boston Properties accomplished the buyout through a newly formed joint venture (JV) with two institutional partners for $465.0 million. Each partner holds one-third of the JV, while Boston Properties serves as the managing member and provides customary property management, leasing and other services. The company expects the investment in the JV to be accounted for under the equity method of accounting.

The acquisition seems a strategic fit, with Seattle offering the most dynamic office markets for companies in the technology, life sciences, financial services, and manufacturing sectors. Even amid the pandemic, the market witnessed significant job growth from the technology and life sciences sectors.

Moreover, Safeco Plaza is placed in a highly desirable location within the city’s active urban center, adjacent to retail, restaurants, and waterfront. The property occupies a full city block in Seattle’s Central Business District, and offers beautiful panoramic views of the Seattle skyline, Puget Sound and the Olympic Mountains. With elegant exterior architecture, a large outdoor plaza, generous window lines, and an efficient central core floorplate; the property is likely to draw tenants across sectors.

Per Owen Thomas, CEO of BXP, "The acquisition of Safeco Plaza is consistent with our long-term strategy of owning, managing, and improving premier properties in markets with a diverse and growing economic base and a deep pool of prospective tenants with knowledge workers that have a demonstrated preference for high-quality office buildings."

The purchase price is funded with cash and proceeds from a new mortgage loan. The loan of $250 million principal amount is secured by the property and bears interest at a variable per annum rate equal to the then 30-day LIBOR plus 220 basis points. It has an initial interest rate of 2.35%.

With the further reopening of the economy and vaccine distribution at a faster pace, there has been an uptick in office jobs from the pandemic lows. Amid these, Boston Properties’ portfolio of modern, class A office buildings is well-poised to benefit from the flight-to-quality preference of office tenants. Nonetheless, the flexible working environment is concerning.

Shares of this Zacks Rank #3 (Hold) company have gained 10.4% in the past six months, underperforming the industry's rally of 24.1%.


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