GE Will Reduce Boston Headquarters Size and Reimburse State

Seaport District

Boston-based General Electric Co. (NYSE: GE) will not build and
occupy a new 12-story office on the Fort Point Channel, and instead
pay back $87 million in incentives to quasi-public state agency
MassDevelopment, the company said Thursday. 

GE and MassDevelopment will sell the 2.7-acre waterfront parcel
that the company and the state agency jointly purchased in late
2016. GE plans to use proceeds from that sale to reimburse
MassDevelopment $87 million the agency spent in upfront costs in
the deal to bring the company’s global headquarters to
Boston. 

“We are looking forward to moving into our permanent
headquarters space in the refurbished Necco brick buildings later
this year,” said Ann Klee, GE’s vice president of Boston
development and operations, in a statement. “While changes in the
Company’s portfolio and operating model will lead to a smaller
corporate headquarters, we are fully committed to Boston and proud
to call it home.”

GE will pay $87 million to MassDevelopment in order to reimburse
the state for upfront expenses related to buying the two Necco
warehouses, which GE is now redeveloping, a company representative
said. That $87 million in upfront costs was part of the state’s
$120 million incentives package to lure GE from Connecticut to
Boston, and includes acquisition costs, construction costs and
other expenses the state has incurred since the late 2016 deal, the
representative said.

It was not immediately clear how much the 2.7-acre Fort Point
parcel could sell for, but real estate in the area is a white-hot
commodity. Real estate development firm Related Beal will likely
pay upward of $200 million for a 6.5-acre parcel adjacent to the GE
land.

The sale will include the site where GE’s new 12-story
headquarters would have gone, which is shovel-ready and permitted
for a 297,000-square-foot office, a company spokesperson said. The
permit is transferable to a new site owner, the representative
said. 

GE has tapped CBRE’s local brokerage team to market the site for
sale. 

Work is well underway to connect two former New England
Confectionary Co. warehouses to create a 95,400-square-foot office
that will house 250 GE employees. GE’s executive team will work out
of those offices when construction is complete later this year, and
the waterfront building will serve as GE’s headquarters. 

GE’s commitment to building the original proposed headquarters
— a campus consisting of the two connected brick-and-beam
warehouses and a newly constructed 12-story office — came into
question almost as soon as the company replaced CEO John Flannery
with Larry Culp in October.

As the long-time chief executive of Danaher Corp., Culp was
well-known for keeping expenses in check. Danaher’s headquarters in
Washington, D.C., is only about 50,000 square feet, even though
it’s a Fortune 200 conglomerate with tens of thousands of employees
worldwide.

“You sometimes see that CEO-itis comes attached with an edifice
complex. … They try to redefine themselves with a grandiose
building. There’s not an edifice complex with Culp,” Jeffrey
Sonnenfeld, a professor and senior associate dean at the Yale
School of Management, told the Business Journal in
October. 

GE’s stock performance has significantly dropped off in recent
years. Just over three years ago after GE announced it would move
its headquarters to Boston, the company’s price has dropped by 65
percent, to just under $10 per share as of early Thursday
afternoon.

The company has been beset by major problems in its power
division and legacy insurance business, among other issues, with
executives committing to significantly shrinking the size of the
company as a result. GE has pledged to split off its health care,
transportation and lighting businesses in the immediate future,
narrowing its focus to its power, aviation and renewable energy
divisions.

In addition to the state incentives, the company was set to
receive $25 million in tax breaks from the city of Boston for the
new headquarters. GE will terminate that $25 million PILOT — or
payment in lieu of taxes — agreement with the city, a
representative said.

The improvements to the Harborwalk, which were also a
requirement of GE’s headquarters deal, are nearly complete, a
company representative said. The company is also finishing
refurbishment of a multi-story green bridge that connects its
office with an office of tech giant Amazon.com Inc. at the adjacent
253 Summer St.

GE remains committed to funding $50 million in charitable
contributions, according to a Baker administration official.

“The Administration together with MassDevelopment reached an
agreement with GE for the company to fully reimburse the
Commonwealth for the cost and expenses associated with the Necco
Street project and the Administration looks forward to working with
GE as the company grows its World Headquarters here in Boston,”
Lizzy Guyton, communications director for Massachusetts Gov.
Charlie Baker, said in a statement.

View Original Article

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *