Boston Properties Inc. and Hines formed a joint venture to develop San Francisco’s tallest office building, a 61-story tower to be built adjacent to a new transit center in the South of Market area.
The companies will each have a 50 percent interest and agreed to acquire the project land for about $190 million from the Transbay Joint Powers Authority, the agency overseeing the transit center, Hines and Boston Properties said today in a statement. The transaction is expected to be completed in the first quarter of 2013.
“We are very gratified to have both a stellar partner and the city’s nod of approval,” Gerald D. Hines, chairman of Houston-based Hines, said in the statement. “We think the tower will be a beautiful addition to San Francisco’s beloved skyline as well as an extremely desirable and sustainable workplace next to one of the state’s busiest transit hubs.”
Boston Properties’ involvement follows the withdrawal of MetLife Inc. as a financial partner with Hines. The New York-based insurer had been named as part of the project team during a 2007 competition to design and construct the high-rise. The venture allows Boston Properties to further increase its holdings in San Francisco, which President Doug Linde said in August was its strongest market, along with Silicon Valley to the south.
“Our multiyear view is that if you’re looking for the formation of wealth and knowledge-based companies, the greater San Francisco area is the dominant cluster,” Linde said on the Boston-based company’s Aug. 7 earnings conference call. “We continue to see that as being a critically important part of the growth of the country’s prosperity, and therefore we think it’s a great place to own real estate.”
Later that month, the landlord said it acquired a 522,000-square-foot (48,500-square-meter) office project under construction in the South of Market neighborhood.
Boston Properties and Hines both focus on owning top-quality office buildings in the most desired sections of U.S. cities including New York, Boston and Washington.
Final approval for the 1.4 million-square-foot San Francisco tower, designed by Pelli Clarke Pelli Architects, was granted by the San Francisco Planning Commission on Oct. 18. The 1,070-foot (326-meter) high-rise will be located next to the transit center at First and Mission streets. A 5.4-acre (2-hectare) rooftop park is planned for the center, which will connect 11 transit systems, according to today’s statement.
“The combination of our two organizations will provide superior management at all levels of this extraordinary project, which we are committed to make a landmark for generations to come,” Mortimer Zuckerman, chairman and chief executive officer of Boston Properties, said in the statement.
The company today reported third-quarter funds from operations fell 7.4 percent from a year earlier to $176.1 million, or $1.16 a share, as expenses increased. Boston Properties projected FFO for 2013 of $5 to $5.15 a share, below the $5.27 average estimate of 18 analysts in a Bloomberg survey. FFO is measure of cash flow used by real estate companies.
Kilroy Realty Corp., a Los Angeles-based real estate investment trust, plans to develop a 27-story office tower at 350 Mission St., across from the Transbay Transit Center. Kilroy acquired the 0.4-acre site for about $52 million and expects to invest $200 million to construct the 400,000-square-foot building, the company said today in a statement.