Boston Properties Inc. (BXP:US), the biggest U.S. office real estate investment trust, said Mortimer Zuckerman will step down as chief executive officer and be replaced by Owen Thomas of Lehman Brothers Holdings Inc.
Zuckerman, 75, will remain executive chairman, the Boston- based company said today in a statement. As Lehman’s chairman, Thomas, 51, has overseen the sale of assets including apartment operator Archstone Inc. and offices in New York and Austin, Texas, to repay creditors after the investment bank filed for bankruptcy in 2008. The changes are effective April 2.
Thomas, who will also serve on Boston Properties’ board, previously worked at Morgan Stanley (MS:US) for more than 20 years, including heading its real estate division, according to today’s statement. The leadership change may mean the REIT will become a more aggressive buyer, given Thomas’s background in acquiring and selling properties, according to John Guinee, a Baltimore- based analyst at Stifel Nicolaus & Co.
“Boston Properties has been an extremely well-run development and acquisitions shop,” Guinee, who has a hold rating (BXP:US)on the company, said in a telephone interview. “But it has not always been on the forefront. You’re bringing into the senior leadership team someone who has an excellent global real estate perspective.”
The company has been slow to capitalize on rising values in New York and San Francisco as those markets started to recover from the 2008 financial crisis, Guinee said.
Boston Properties was the worst performer in the Bloomberg REIT Office Property Index in the past year, rising 1.7 percent, compared with a 10 percent advance for the gauge of 16 companies. The shares climbed 1.1 percent to $104.04 at the close today in New York.
Zuckerman said the REIT “has been focused on identifying the right person to take over as CEO,” a job he took on in 2010 after the death of his longtime business partner and co-founder, Ed Linde.
Thomas is “an accomplished executive and well known throughout our industry, and he is the right person to lead the company for the future and to build on our success,” Zuckerman said in the statement.
The logical choice to succeed Zuckerman would have been Douglas Linde, Boston Properties’ president since 2007 and Ed Linde’s son, according to John Sheehan, an analyst with St. Louis-based Edward Jones & Co.
“I’m a little surprised he didn’t get the role,” Sheehan said in an interview.
Arista Joyner, a Boston Properties spokeswoman, said in an e-mail that the company would have no comment on the succession beyond the statement.
Boston Properties, founded in 1970, is the biggest U.S. office REIT by market value. It owns properties primarily in coastal markets including Boston, San Francisco and New York, including 60 percent of the General Motors Building in Manhattan. Last month, the company completed its purchase of a San Francisco development site for $71 million in the city’s South of Market district as rents rise in the area.
Thomas began managing Morgan Stanley’s real estate- investing business in 1994 and oversaw that unit until 2005, when he became president of the asset-management division. He was brought back to head the real estate unit in 2009, after it led the asset-management division into a $1.2 billion pretax loss in the fourth quarter of the previous year.
In 2010, gains in the real estate business helped the asset-management division return to profitability.
Thomas agreed to a three-year contract with Boston Properties and will earn a base salary of $750,000, according to a regulatory filing (BXP:US). His annual target bonus will be 230 percent of his base pay and he will receive an initial equity grant valued at $4.5 million, including shares in the company and stock options.
He also has agreed to buy $1 million of the company’s shares, according to the filing.
Zuckerman is the second major REIT CEO to resign in the past two weeks. Vornado Realty Trust (VNO:US) said on Feb. 27 that Michael Fascitelli resigned and would be replaced by chairman and former CEO Steven Roth, effective April 15.
In addition to running Boston Properties, Zuckerman is chairman and publisher of the New York Daily News, and chairman and editor in chief of US News & World Report LP.
His commentaries on politics and the economy, including a declaration that the U.S. is in a “modern-day depression,” have led to speculation that he might seek political office, including mayor of New York. Mayor Michael Bloomberg talked to Zuckerman about a possible mayoral bid this year, the New York Times reported on Jan. 7.
“There’s no way I’m going to do that,” Zuckerman said Jan. 30 on Boston Properties’ earnings conference call. “If there was such a thing as an appointed mayor of New York, I’d consider it.”
The mayor is founder and majority owner of Bloomberg News parent Bloomberg LP.
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