Key facts
- BXP secured a $1.2 billion construction loan for its 343 Madison Avenue office tower.
- The loan financing was led by Wells Fargo, Bank of America, Bank of New York Mellon, and JPMorgan Chase.
- BXP is close to finalizing an $80 million investment from an equity partner, representing a 10% interest.
- The project is expected to have a total capitalization of $2 billion.
- The building is 50% preleased, with Starr and McDermott Will & Schulte as anchor tenants.
- BXP reported second-quarter funds from operations of $283.4 million, beating expectations.
BXP, formerly Boston Properties, has secured a $1.2 billion construction loan for its 930,000-square-foot office tower at 343 Madison Avenue in Midtown Manhattan. The financing, led by Wells Fargo alongside Bank of America, Bank of New York Mellon Corp., and JPMorgan Chase, is expected to cover 60% of the development costs for the four-year loan, which includes a one-year extension option.
During the REIT's second-quarter conference call, CEO Owen Thomas informed investors that BXP is close to finalizing an $80 million investment from an equity partner, which would represent a 10% interest in the project and round out the development's $2 billion capitalization. Thomas indicated that BXP is in talks with additional investors to sell further interest, potentially up to 30% to 50% of the property.
Vertical construction on the 46-story tower began last year, partly due to ground lease requirements with the Metropolitan Transportation Authority. Norges Bank Investment Management, a previous partner since 2017, unexpectedly withdrew last year, prompting BXP's search for new equity. BXP anticipates benefiting from the limited supply of large, prime office spaces in Manhattan, where the vacancy rate for buildings constructed after 2000 is only 6.8%.
Investment and insurance company Starr is anchoring the building with an initial 275,000-square-foot lease, which has since been expanded. Law firm McDermott Will & Schulte has also leased nearly 150,000 square feet, bringing the building to 50% preleased. BXP is in negotiations with other tenants that could push occupancy to 70%. Thomas noted that the remaining top floors, expected to command record rents of $350 per square foot, will likely be leased closer to the building's late 2029 completion.
Key features of 343 Madison Avenue include its connection to Grand Central Terminal, with BXP constructing a new escalator from the station to the tower's lobby. BXP's overall development pipeline includes seven office and residential projects totaling 3.5 million square feet and $3.2 billion in investment, with 343 Madison being the largest.
BXP reported second-quarter funds from operations of $283.4 million, surpassing Wall Street expectations and leading to a roughly 6% increase in its stock price. The company's stock has recovered from a March dip attributed to macroeconomic pressures, including tensions in Iran, and is up over 9% year-to-date.