Jones Lang LaSalle


DUBAI TOWER TWOFER IN DOUBT
By LOIS WEISS

April 20, 2006 -- Boston Properties has hit a snag on its sale of Five Times Square to Dubai-based Istithmar, even though the $1.1 billion deal for 280 Park Ave. in the same package is forging ahead.

Sources told The Post that Istithmar, an investment vehicle for the family-controlled Gulf Emirate, is apparently concerned that when tax incentives for the site expire in 2022, after-tax rents won't give them the return they were looking for at Five Times Square, which was set to change hands for $1.1 billion.

A report yesterday from Merrill Lynch analyst Steve Sakwa noted the tax incentive problems with the 1.1 million-square-foot building. Other sources have confirmed Istithmar's worries to The Post.

Sakwa also said Boston Properties will likely sell 280 Park Ave. for more than $950 a foot.
If only the Park Avenue deal sails, Sakwa expects Boston Properties - controlled by Daily News Publisher Mort Zuckerman - to pay out a special dividend of $5 to $6 per share, down from his previous estimate of $10 per share for the twofer.

Five Times Square is a 2002-era tower rented to Ernst & Young, Giuliani & Partners, and retailers including Red Lobster.

It is technically on a long-term ground lease to New York State's redevelopment Arm. Boston Properties received some tax relief and agreed to lower rents as part of the deal to help redevelop the then-blighted Times Square area.

Another developer familiar with the Times Square incentives said, "When the incentives wear off, [real estate] taxes could be as much as $18 or $20 a foot."