Norway’s sovereign-wealth fund agreed to buy a 45 percent stake in a Manhattan office building from Boston Properties Inc. (BXP:US) for $684 million, expanding its real estate holdings in the world’s largest economy.
Boston Properties, the biggest U.S. office real estate investment trust, will keep a 55 percent stake in the Times Square Tower and manage the building on behalf of the joint venture, the Oslo-based fund said in a statement on its website.
The $760 billion fund is seeking to increase the proportion of its holdings in real estate to about 5 percent and made its first U.S. property investment this year. Boston Properties put the tower -- located between 41st and 42nd streets and Broadway and Seventh Avenue -- up for sale in June.
“We are extremely pleased to form a new and important relationship with such a strong and reputable organization as Norges Bank, while at the same time once again demonstrating our ability to create and realize value for our shareholders through our development and management expertise,” Mort Zuckerman, founder and chairman of Boston Properties, said in the Boston-based REIT’s own statement.
Norway’s Government Pension Fund - Global, the world’s largest sovereign-wealth fund, is managed by Norges Bank Investment Management. The fund made its first U.S. real estate deal in February with the purchase of stakes in five office buildings, two of them in New York, from TIAA-CREF.
The fund has also purchased commercial properties in London, Paris, Frankfurt, Berlin and Zurich as well as Sheffield, England. It held 0.9 percent of its total portfolio in real estate at the end of the second quarter.
Norway generates money for the fund from taxes on oil and gas, ownership of petroleum fields and dividends from its stake in Statoil ASA (STL), the country’s largest energy company.
The Times Square Tower, which includes retail space and signage, is almost fully occupied, according to Boston Properties’ statement. The ground on which the building sits is leased for the next 76 years from the city of New York. The joint venture will have the right to purchase the ground starting in 2024, according to the REIT’s statement.
The building, also known as 7 Times Square, was completed by Boston Properties in 2004. The area is a popular tourist attraction with a mix of flagship stores, family entertainment and office occupants including Thomson Reuters Corp. and Ernst & Young LLP.
Boston Properties rose 0.6 percent to $105.44 at 12:35 p.m. in New York.
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