Boston Properties, GIC, CPP Form Co-Investment Program To Buy U.S. Office Buildings

Boston Properties isn't shying away from its core business of downtown office buildings anytime soon.

The publicly traded developer has formed a $1B co-investment program with the Canada Pension Plan Investment Board and GIC, the sovereign wealth fund of Singapore, the three entities announced in a press release on Wednesday. The fund will focus on acquiring office properties in BXP's markets of focus: New York, San Francisco, Boston, Washington, D.C., Los Angeles and Seattle.

BXP will contribute $250M, serve as the general partner and manage the properties the trio acquires. CPP Investments will also contribute $250M, while GIC will furnish the remaining $500M, according to the release. The partnership will seek to leverage its equity with another $1B in debt, giving it a total of $2B in spending power.

As part of the arrangement, Boston Properties will source operating office buildings to acquire and present GIC and CPP Investments with "exclusive first offers to form joint ventures," the press release stated. The program is slated to take two years to deploy its capital.

CPP Investments has partnered with Boston Properties on investments before, such as a $1B, new-construction office campus in San Jose, California, on which the Boston developer broke ground just before the coronavirus pandemic threw the global economy into disarray, leading to existential questions about the future of office buildings. Since that time, BXP has focused more on acquisitions, preceding its new partnership with an acquisition of a $100M life sciences portfolio in the Boston suburb of Waltham.

Although the U.S. cities targeted by the partnership have so far not seen significant increases in coronavirus cases as the delta variant sweeps across the globe, they also have experienced some of the slowest return-to-office rates in the country, according to card swipe data from Kastle Systems. As more companies indicate a long-term acceptance of hybrid work, early demographic trends suggest that it could increase the relative appeal of suburban properties over urban cores.