Is Boston Properties Buying Blackstone's Los Angeles Stake?

Boston Properties Inc (NYSE:BXP). (NYSE:BX) has agreed to purchase a 50% interest in Santa Monica’s office complex – Colorado Center – from The Blackstone Group L.P. (NYSE:BX) for over $500 million, according to the Los Angeles edition of The Real Deal. The acquisition would mark the company’s first acquisition in Los Angeles.

Notably, Colorado Center is a 15-acre property in the Silicon Beach area. This six-building campus comprises more than 1 million square feet of space and is around 75% occupied with one building lying completely vacant. Tenants of this trophy asset include tech companies Hulu and Edmunds.

Blackstone had acquired this 50% stake in the property in 2007 as part of a $39 billion portfolio buyout from Equity Office Properties Trust. The other 50% stake of this complex is under financial services organization, The Teachers Insurance and Annuity Association.

This stake acquisition deal seems a strategic fit for Boston Properties given that the Silicon Beach is popular with technology companies. While the company’s class A office portfolio is concentrated in four markets – Boston, New York, San Francisco and Washington, DC, – the foray into the Santa Monica market in Southern California is expected to open up more scope to the company to capitalize on improving market fundamentals.

Further, Given Boston Properties’ leading position in the high barrier-to-entry U.S. markets and a better employment scenario, we expect decent growth in demand for its office assets to continue, though interest rate hikes and stiff competition in some of its markets remain as concerns.

Currently, Boston Properties carries a Zacks Rank #3 (Hold). However, investors interested in the REIT industry can consider better-placed stocks like PS Business Parks Inc. (NYSE:PSB) and Whitestone REIT (NYSE:WSR) . Both stocks have a Zacks Rank #2 (Buy).


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