BXP Sells 45% Stake In Planned Madison Avenue Tower, Locks In Ground Lease With Escape Hatch

Boston Properties has brought on an unnamed institutional investor for its Grand Central office project, selling a 45% stake in the proposed 900K SF tower.

After agreeing to the deal last week, the REIT locked in a 99-year ground lease with the Metropolitan Transportation Authority for the site at 343 Madison Ave., BXP said in its second-quarter earnings statement Tuesday. BXP has agreed to build an entrance to the new Grand Central Madison terminal that houses the Long Island Railroad’s new East Side Access project.

The lease includes a provision that allows the joint venture to terminate the agreement after building the entrance and be reimbursed for the work, which is expected to take two years.

The MTA in 2013 put out a request for proposals for the redevelopment of the site, which had previously been home to the agency's 15-story headquarters. BXP began demolishing the property in 2021, and last year filed plans to build a 989K SF office at the site on Madison Avenue between 44th and 45th streets that would also feature retail and mechanical space.

"With direct access to transit in the relatively tight Grand Central submarket, 343 Madison is a unique offering and preliminary discussions with potential anchor clients have been constructed," BXP CEO Owen Thomas said on the company's earnings call Wednesday. 

BXP executives were asked on the call by an analyst to name the minority investor in the project and declined.

Architecture firm Kohn Pedersen Fox is designing the property. BXP agreed to a payments in lieu of taxes in the deal, which would fund transit renovations, Crain’s New York Business reported last year.

Under the joint venture, BXP would be handling development, property management and leasing services, it said in the statement. If the venture decides to proceed with the building, it would come as Phase 2 of the project.

“There can be no assurance that Phase 1 will be completed on the terms currently contemplated or that Phase 2 of the development project will commence on the terms currently contemplated or at all,” BXP said in its earnings statement. 

Office development is considered a greater risk now, with the leasing market slow and interest rates higher. Vacancy in the Manhattan office market hit a new all-time high in the second quarter. Still, many in the office leasing world say newly built properties are more likely to land tenants looking for office space and can command higher-than-ever rents.

If it does come to fruition, the property at 343 Madison Ave. would be just a few blocks from One Vanderbilt, SL Green’s supertall building that opened in 2020. The property is fully leased and has reportedly secured rents as high as $300 per SF.