CPP, Boston Properties, GIC form $2.5B U.S. office venture

IMAGE: CPP Investments logo.CPP Investments will invest over $312 million Cdn in a multi-billion-dollar U.S. office joint venture alongside Boston Properties Inc. and Singapore-based GIC, the partners announced Wednesday morning.

In total, the partners plan to invest $1.25 billion in equity acquiring properties in targeted U.S. markets over the next two years. With the addition of financing, they could acquire up to approximately $2.5 billion in assets under the partnership.

“Employers in top global cities continue to seek best-in-class office environments that will attract and retain talent,” said Peter Ballon, CPP Investments’ managing director and global head of real estate, in the announcement.

“By expanding our relationships with both Boston Properties and GIC in this new program, we will be strongly positioned to serve this ongoing market need and in turn generate returns for our fund contributors and beneficiaries.”

Joint venture targets six U.S. cities

Boston Properties (BXP-N) will also commit about $312 million to the venture, while GIC’s commitment is about $625 million (based on 25 per cent-25 per cent-50 per cent interests in the venture).

The partners intend to selectively acquire and operate office properties in Boston Properties’ core markets – Boston, Los Angeles, New York, San Francisco and Washington, as well as in Seattle.

“We are delighted to expand our relationship with CPP Investments and to begin a new relationship with GIC, two highly respected and experienced real estate investors,” said Owen Thomas, CEO of Boston Properties, in the announcement.

“This new co-investment program underscores the attractiveness of class-A office investment opportunities in our markets and BXP’s track record of creating long-term value at the property level.”

Boston Properties is the largest publicly traded developer, owner and manager of class-A office properties in the U.S.

Under the agreement, 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. Boston Properties will act as general partner and provide property management, leasing and other services.

U.S. office market post-pandemic

The venture is an expression of the partners’ belief in the resiliency of the U.S. office market as the country emerges from the effects of the COVID-19 pandemic, according to GIC’s Adam Gallistel.

“We firmly believe that top companies need collaborative workspaces to build culture, innovate and win the war for talent,” said Gallistel, the firm’s managing director of Americas real estate. “We are confident that Boston Properties will identify assets that serve this need and position our venture to capitalize on an uptick in demand stemming from a return to the office and the reopening of America’s great cities.”

CPP Investments and Boston Properties are already partners in two other major U.S. developments, including the massive 1.1-million-square -foot Platform 16. The class-A urban office campus is being constructed on a 5.4-acre site near Diridon Station in downtown San Jose.

CPPIB holds a 45 per cent ownership interest in Platform 16, with Boston Properties retaining a 55 per cent ownership stake.

Boston Properties and CPP Investments are also partners in the Santa Monica Business Park campus in Santa Monica, Calif., a relationship which began in 2018.

About Boston Properties

Boston Properties is a fully integrated REIT that develops, manages, operates, acquires and owns a diverse portfolio of primarily class-A office space.

The portfolio totals 51.6 million square feet and 196 properties, including nine properties under construction/redevelopment.

About CPP Investments

CPP Investments is a professional investment management organization that manages the fund for over 20 million contributors and beneficiaries of the Canada Pension Plan. To build diversified portfolios of assets, investments are made around the world in public equities, private equities, real estate, infrastructure and fixed income.

Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, San Francisco, São Paulo and Sydney, CPP Investments is governed and managed independently of the Canada Pension Plan and at arm’s length from governments.

As of March 31, 2021, the fund totalled $497.2 billion.

About GIC

GIC is a global investment firm, established in 1981 to strengthen Singapore’s financial future by managing its foreign reserves. It engages across a wide range of asset classes in over 40 countries.

Headquartered in Singapore, GIC’s global workforce of over 1,700 is positioned in 10 key financial cities.

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