Boston Properties Inc. bought an office project under construction in San Francisco’s South of Market district from Rockwood Capital and TMG Partners as investors scour the city for purchases.
The company’s Boston Properties LP unit paid $62.2 million in cash and 1.59 million units of preferred stock that can be sold for $50 each and carry an annual dividend yield of 2 percent, according to a filing today with the U.S. Securities and Exchange Commission. The 522,000-square-foot (48,500-square-meter) development, located at Folsom and Hawthorne streets, is about 85 percent pre-leased, with initial occupancy expected in mid-2014, the Boston-based company said.
San Francisco’s office market has the best rental-growth forecast of any U.S. city, according to Green Street Advisors Inc., a Newport Beach, California-based research firm. Citywide office rents jumped 28 percent in the second quarter from a year earlier as Internet firms Airbnb Inc., Twitter Inc. and Yelp Inc. signed new leases, according to broker CBRE Group Inc.
As part of the deal, Boston Properties Inc., the biggest U.S. office real estate investment trust by stock-market value, also acquired an adjacent parcel with a vacant, 22,000-square-feet building that may be redeveloped, and assumed a $170 million construction loan commitment. No amount is outstanding on the commitment, according to the filing.