General Electric will pay rent to MassDevelopment on two industrial buildings that it plans to renovate in Boston’s Fort Point, after acquiring the property from Procter & Gamble and selling it to the state agency for an as-yet undisclosed price.
MassDevelopment’s board of directors Thursday authorized the state to acquire two parcels owned by Procter & Gamble which will become part of General Electric’s new 2.5-acre global headquarters.
One parcel contains two 6-story warehouses at 5 and 6 Necco Court; the other is land along Fort Point Channel which will become part of an expanded Boston Harborwalk. GE also will build a 12-story, 293,000-square-foot office building on an adjacent parking lot after acquiring the land from Procter & Gamble.
New details emerged this week about the structure of the real estate transaction and the obligations of MassDevelopment and GE. An incentive package signed in January commits the state to $120 million in infrastructure and real estate-related costs supporting GE’s move from its longtime suburban campus in Fairfield, Connecticut in 2018.
Specifics are still being negotiated with GE, but MassDevelopment CEO Marty Jones said today the basic framework has been agreed upon with the goal of finishing the transaction in September.
GE has agreed to purchase two parcels from Procter & Gamble and will own the property where the new office tower will be built. MassDevelopment will acquire a 1-acre waterfront parcel from Procter & Gamble directly, Jones said, but GE will be responsible for leading the upgrades to the Boston Harborwalk.
“They will be actively involved in the development of the entire campus, because it is a global headquarters,” Jones said.
GE will acquire the warehouses parcel and immediately resell it to MassDevelopment, Jones said. The purchase price will reflect the current unimproved condition of the buildings. MassDevelopment will have an independent appraisal to help determine the purchase price, Jones said.
GE will lease back the space in the warehouse buildings from MassDevelopment and pay an unspecified rent still being negotiated, Jones said. Average rents for class A office space in the Seaport District were $62.35 per square foot in the second quarter, according to research by Boston-based Encompass Real Estate Strategy.
“We’re discussing many things since it’s a big project and a very complicated lease transaction. There are lots of requirements for them to improve the building and operate it and we’re working on a lot of those details,” Jones said.
In a notification letter to the BRA last month, GE said the new headquarters will include makerspaces, a museum and community co-working space. Three-quarters of the ground floor will be open to the public, and a covered outdoor “GE Plaza” would connect the office tower and the warehouse buildings.
In an interview this week, Gov. Charlie Baker defended the state’s role as landlord for a portion of the site, which will enable public funding to be used for improvements.
“Frankly I think that’s a much better way to finance this stuff than some of the ways other states have done historically,” Baker said. “We’re basically making a betterment investment in what’s a public asset that the public will retain control and ownership of. That was always assumed that the plot is going to be a public property that the public is going to continue to own, and that GE is going to build on that and pay rent on that site.”
The transactions are expected to close around the time a formal development proposal is filed with the Boston Redevelopment Authority in late summer, Jones said. Gensler’s Boston office is designing the campus.
