Boston Properties' $1 acquisition of 360 Park Avenue South from Canada Pension Plan Investment Board is a strategic move, reflecting confidence in Midtown South's potential. (Boston Properties)
The world isn't ending, and neither is 360 Park Avenue South, the historic office building at East 26th Street. Boston Properties, the owner, is finishing a more than $100 million renovation.
Last week, Canada Pension Plan Investment Board sold its 29% stake in the tower to Boston Properties for $1. This move surprised many, as CPPIB is one of the world's largest property owners, and Boston Properties is a successful real estate company.
The tower, built in 1913, was bought by Boston Properties and partners in 2021 for $300 million. The sale price of $1 seems low, but Boston Properties reported that CPPIB's exit saved them from a $46 million commitment to the renovation project, which had already cost them $71 million.
Some saw CPPIB's exit as a lack of confidence in commercial real estate, but this doesn't necessarily reflect the value of the building itself. Peter Turchin, the tower's leasing agent, and other brokers say the fund's exit means "zero."
Boston Properties knew the tower would soon be empty when they bought it, as the sole tenant planned to leave at the end of 2021. They saw this as an opportunity to attract tech and media companies to Midtown South. They renovated the ground floor, lobbies, and added a new amenity center and lounge underground. They also improved power and airflow systems.
The highlight is a new 13,000 square-foot roof deck with a giant wooden water tank. Boston Properties estimates that the building will be fully leased by the fourth quarter of 2025.
The first office tenant signed on last summer was Iconiq Capital, a wealth management firm. The first retail lease was Saga Hospitality Group, which will open a new restaurant by chef James Kent.
Turchin said he was in talks with several prospective office tenants, with asking rents ranging from $90-110 per square foot. He added that financial firms are now interested in the area, as shown by Iconiq's lease.
