The Canada Pension Plan Investment Board is entering into its second major investment with Boston Properties in California in the past 16 months. CPPIB is taking a 45 per cent interest to develop Platform 16, a 1.1-million-square-foot class-A office campus adjacent to a huge Google site in downtown San Jose.
Boston Properties, Inc. (BXP-N) is the largest publicly traded developer, owner and manager of class-A office properties in the United States.
Boston Properties entered into a 65-year ground lease for Platform 16 in November 2018. With the ground lease, it secured the right to purchase the underlying land during a 12-month period commencing Feb. 1, 2020 for $178.6 million (all figures Cdn).
As part of the CPPIB transaction, Boston Properties will retain the 55 per cent ownership stake and provide development, property management and leasing services. The first joint venture between Boston Properties and CPPIB was an $831-million Santa Monica Business Park campus acquisition in 2018.
“Partnering with Boston Properties on the Platform 16 development is a great example of our real estate strategy in the United States,” said Hilary Spann, managing director, head of real estate investments, Americas at CPPIB, in the release.
“We are very pleased to further our relationship with a best-in-class owner and operator and we look forward to expanding our office portfolio in the dynamic Bay Area.”
Prime location for Platform 16
Located on a 5.4-acre site, Platform 16 is beside Google’s planned eight-million-square-foot transit village. It is also adjacent to Diridon Station, the largest multi-modal transportation hub in the Bay Area consisting of Caltrain, VTA light-rail, the ACE train and the planned BART and high-speed rail lines.
“We are pleased and honoured to have Canada Pension Plan Investment Board as our partner on this exciting development, expanding the relationship between BXP and CPPIB,” said Owen D. Thomas, CEO of Boston Properties, in the release. “We look forward to bringing this project to market and broadening our footprint on the West Coast.”
This joint venture will develop a planned three-building campus. The partners expect the buildings to feature large floor plates ranging from approximately 25,000 to 90,000 square feet, 15-foot floor-to-floor heights, 16 large outdoor terraces that give the project its name, along with multiple indoor and outdoor workspaces.
Other on-site amenities including a large fitness and wellness facility and conference centre.
Platform 16 will have immediate access to the adjacent Guadalupe River Park and various retail and restaurant amenities.
Boston Properties has secured approvals and entitlements for the development of Platform 16, completed design plans and begun to clear the site. Construction could commence in the next six months, depending on market and other conditions.
CPPIB’s Santa Monica investment
CPPIB and Boston Properties’ other joint venture, Santa Monica Business Park, is a 47-acre office park consisting of 21 buildings totaling approximately 1.2 million net rentable square feet.
Approximately 70 per cent of the rentable square footage is subject to a ground lease with 80 years remaining, including renewal periods. The ground lease provides the joint venture with the right to purchase the land underlying the properties in 2028 with subsequent purchase rights every 15 years.
The property was 94 per cent leased at purchase.
CPPIB invested $195 million for a 45 per cent ownership in that venture as well. Boston Properties invested $238.5 million and the acquisition was completed with about $397.5 million of financing.
About Boston Properties, CPPIB
Boston Properties is concentrated in five markets – Boston, Los Angeles, New York, San Francisco and Washington, D.C. The company is a fully integrated real estate company which develops, manages, operates, acquires and owns a diverse portfolio of primarily class-A office space.
Its portfolio totals 50.9 million square feet and 193 properties, including 12 properties under construction.
Canada Pension Plan Investment Board invests the funds not currently needed by beneficiaries of the Canada Pension Plan (CPP), on behalf of about 20 million members.
To build diversified portfolios of assets, CPPIB invests in public equities, private equities, real estate, infrastructure and fixed income instruments.
Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, San Francisco, São Paulo and Sydney, CPPIB is governed and managed independently of the Canada Pension Plan and at arm’s length from governments.
As of June 30, 2019, the CPP Fund totaled $400.6 billion.