By Jon Peterson
Boston-based Boston Properties has acquired the five percent interest it didn’t own in Salesforce Tower in San Francisco for approximately $210.9 million, as was stated by the public REIT in its first quarter 2019 earnings report. Even though the statement did not explicitly mention which partner, it has been widely and publicly reported in the past that Hines was the partner on the project.
This amount was reduced by around $24.1 million to $186.8 million to reflect the repayment of Boston Properties’ preferred equity and preferred return in the venture. The partner was entitled to receive an additional promoted payment based on the success of the property which is included in the total consideration.
Hines did not respond to an email seeking comment for this story.
Salesforce Tower had a total construction cost of $1.1 billion when the asset was first developed. It was opened for business in May of 2018. The property totals 1.4 million square feet in San Francisco’s Transbay neighborhood. Boston Properties stated in its first quarter earnings report that Salesforce Tower is currently 82.5 percent leased. The annualized rental obligations per square foot on the property is $95.86.
Salesforce is the anchor tenant in the property; it had signed an initial lease for 714,000 square feet. There are a variety of other tenants in the property. Covington, a law firm, has a lease for just over 79,000 square feet. WeWork, the co-working space company, has a lease on three floors for 79,000 square feet. The San Francisco office of CBRE has leased two floors totaling 38,348 square feet.
The lease with Salesforce is a major reason why Salesforce is the second biggest tenant in the portfolio owned by Boston Properties. The public REIT reported in its earning report that Salesforce represents 2.35 percent of its annualized rental obligations. The only other bigger tenant is Arnold & Porter Kaye Scholer, an internationally known law firm.
Boston Properties is a major owner of office buildings in the San Francisco Bay Area market. It has ownership in a total of 35 buildings in the market 7.5 million square feet. This portfolio is currently 90.7 percent leased. The assets are located in San Francisco, South San Francisco, Mountain View, Santa Clara and San Jose.