Boston Properties (BXP) to Sell 45% Stake in Two Life-Science Assets
Boston Properties, Inc. BXP entered into agreements with Norges Bank Investment Management (“NBIM”) to divest 45% of its interest in two life sciences development properties — 290 Binney Street and 300 Binney Street — in Kendall Square in Cambridge, MA, to the bank. Shares of BXP gained 10.7% in the Nov 14 normal trading session following the announcement.
Per the agreement terms, Boston Properties will retain 55% of interest in the joint ventures and provide development, property management and leasing services for the ventures. The gross valuation of the stake sale in the 810,000 square feet properties totals roughly $1.66 billion or $2,050 per square foot.
NBIM funded around $212.9 million at the closing for its investment in 300 Binney Street, which isa six-story building undergoing redevelopment into 240,000 square feet of laboratory/life sciences space. The property is 100% pre-leased to the Broad Institute, which is expected to take occupancy in January 2025.
On the other hand, the closing of NBIM’s investment in the 16-story, 570,000 square feet 290 Binney Street will lower BXP’s share of estimated future development spending over time by around $533.5 million, making the company’s move a strategic fit. 290 Binney Street is presently under construction and 100% pre-leased to AstraZeneca, with the company expected to take occupancy in April 2026.
Per Owen Thomas, Chairman & CEO of the company, “We are delighted to deepen our longstanding partnership with Norges Bank Investment Management. Their meaningful investment in BXP’s newest life sciences development in the heart of Kendall Square demonstrates the value placed by investors on well-located, well-leased premier workplaces with strong stewardship.”
The life-science industry is booming on the back of the increasing need for drug research and innovation. Against this backdrop, Boston Properties is converting numerous straight office buildings to laboratory/life science spaces in its suburban portfolio, especially its Kendall Center project, which is one of the leading preferred locations for life-science clients in the world.
Further, Boston Properties’ encouraging development and redevelopment pipeline is likely to fuel net operating income growth in the coming years. It has roughly 5.8 million square feet of life sciences-focused development opportunities and around 1.6 million square feet of current lab developments and redevelopments in process.
Its solid balance sheet position, with $3.3 billion of liquidity as of Sep 30, 2023, is likely to continue supporting its efforts to capitalize on long-term growth opportunities.
Shares of this Zacks Rank #3 (Hold) company have gained 20.5% over the past six months against the industry’s 1% decline.
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Nonetheless, a choppy office market environment amid persistent macroeconomic uncertainty is likely to soften the demand for office properties in the near term, raising concerns for this office REIT.
Also, given the prevailing high-interest rate environment, Boston Properties may find it difficult to purchase or develop real estate with borrowed funds as the costs are likely to be on the higher side.
Stocks to Consider
Some better-ranked stocks from the REIT sector are Welltower’s WELL, EastGroup Properties EGP and Stag Industrial STAG, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Welltower’s current-year FFO per share has moved marginally northward over the past week to $3.58.
The consensus estimate for EastGroup Properties’ 2023 FFO per share has moved marginally upward in the past week to $7.69.
The Zacks Consensus Estimate for Stag Industrial’s ongoing year’s FFO per share has been raised 1.3% over the past month to $2.28.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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