Boston Properties and Al Jazeera have agreed to terminate the broadcast news network’s 85,000-square-foot lease at 250 West 55th Street in Midtown, with Al Jazeera paying $45 million to leave its space after announcing it would shut down its Al Jazeera America channel this spring.
In its year-end earnings release Wednesday, the Boston-based real estate investment trust said it had “entered into a lease termination agreement with a tenant” at the 38-story, 1 million-square-foot office tower.
While Boston Properties did not name the tenant in question during its earnings call Thursday, industry analysts confirmed it is the Qatari media giant, which announced plans to shut down the struggling Al Jazeera America at the end of April.
Al Jazeera agreed to take roughly 85,000 square feet at the Midtown office building in 2014, as The Real Deal reported, including around 50,000 square feet on the second floor – an expansive space with double-height ceilings ideal for a broadcast studio.
But Al Jazeera never moved into the space, and analysts estimate the network paid Boston Properties more than five years worth of rent to break the lease, which was scheduled to run through February 2035. The one-time lease termination payment is worth approximately $45 million, the REIT confirmed in its earnings release.
Al Jazeera’s space at 250 West 55th Street also included a ground-floor retail space with full frontage on Eighth Avenue, as well as a full-floor space on the building’s upper floors.
Al Jazeera America launched in August 2013 after Al Jazeera acquired Al Gore’s Current TV channel for $500 million – with the goal of using Current TV’s distribution network to launch a new, U.S.-based news operation.
In a staff-wide memo last month, Al Jazeera America CEO Al Anstey said the channel would shut down as its “business model is simply not sustainable in light of the economic challenges in the U.S. media marketplace.”
In Boston Properties’ year-end earnings call Thursday, CEO Owen Thomas said the company believes real estate investment activity from “some oil-based sovereign wealth funds should slow” as a result of collapsing oil prices, while investment flows from China “should recede” as well due to the country’s weakening economy.
But Thomas also noted “capital values for high-quality assets are holding up,” citing recent deals for AXA Financial-owned office towers at 1285 Sixth Avenue and 787 Seventh Avenue, both in Midtown Manhattan.
The REIT sold off about $584 million worth of assets in total last year, and Thomas said it expects another $200 million to $250 million in dispositions in 2016 — mostly through selling “non-core assets” or “assets where we are able to achieve extraordinary pricing.”
Boston Properties’ New York City portfolio was 91.5 percent leased at the end of last year, up from 90.9 percent at the end of 2014 – though company president Doug Linde said he expects to see “pretty flat, marginal rent [growth]” in the REIT’s core Midtown market this year.
Source: The Real Deal