Boston Properties (NYSE: BXP) is making a big splash. The leading office real estate investment trust (REIT) unveiled a series of acquisitions when it reported its second-quarter results in late July. These deals added to its life science portfolio, bolstered its presence in Manhattan, and achieved its goal of expanding into the Seattle market. Here's a closer look at the company's shopping spree, which likely isn't over yet.
Heading to the Pacific Northwest
The most notable deal Boston Properties made in the quarter was the acquisition of Safeco Plaza in Seattle -- a 50-story, 800,000 square foot Class A office property that's 90% leased. At a $465 million gross purchase price, it's the company's largest acquisition. However, the REIT plans to make this purchase with one of the participants of its coinvestment program. As such, it expects to own about 51% of this property.
This property marks the company's entry into the Seattle market, adding the sixth market to its portfolio after Boston, Los Angeles, New York, San Francisco, and Washington, D.C.
Boston Properties has been seeking an opportunity to expand into the Seattle market, which it views as highly attractive. The city benefits from strong job growth from the technology and life science sectors, with Seattle growing faster than any large city last year. That growth should drive steady demand for office space in the city. Boston Properties sees this acquisition providing it with an excellent platform from which to continue expanding in the city.
Growing its life science portfolio
In addition to traditional office space, Boston Properties has been investing heavily to grow its life science portfolio this year. The company made two deals during the quarter.
First, it's purchasing the Shady Grove Bio+Tech Campus in Rockville, Maryland. The property features seven buildings with 435,000 square feet on 31 acres. The REIT is paying $116.5 million and will own the entire campus. It expects to convert the office buildings to Class A lab space to meet growing demand, starting with three currently vacant buildings.
The company also bought 153 and 211 Second Ave. -- two lab properties with 137,000 square feet in Waltham, Massachusetts -- paying $100 million for the 100% leased properties.
These deals will help expand Boston Properties' growing life sciences portfolio. It currently has more than three million square feet of in-service properties and about one million square feet of lab development and redevelopment projects under construction it expects to complete over the next 36 months. In addition, Boston Properties has five million square feet of life science development opportunities it can pursue in the future.
Expanding its presence in New York
Boston Properties also acquired 360 Park Avenue South -- a 450,000 square foot office property in Manhattan for which the company will pay $300 million. The property will add to its Manhattan presence, where the REIT owns and operates roughly 8.8 million square feet of Class A office space that is currently 94% leased.
While the property is currently fully leased to a single tenant, they're vacating later this year. Because of that, Boston Properties plans to complete extensive upgrades to the property and transform it into a premier modern building that will attract Class A tenants. The company sees it as an ideal value-add opportunity because of its location in the Midtown South submarket, a preferred location for tech, advertising, media, and information companies.
More deals seem likely
These deals are only the beginning for Boston Properties. In cooperation with two institutional investors, the company recently established a coinvestment program with up to $2 billion of initial investment capacity.
While it will use some of that to fund its first foray into Seattle, it has plenty of dry powder to continue its shopping spree. On top of that, it has a top-notch balance sheet, giving it plenty of financial flexibility to keep growing its life sciences portfolio and find additional value-add investment opportunities.