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It’s rare to form a company around one building and sell stock, but that’s the plan for State Street’s home.
It’s rare to form a company around one building and sell stock, but that’s the plan for State Street’s home. Michael Fein/Bloomberg News/File 2009/Bloomberg

When is a skyscraper more than just a building? When it becomes a publicly traded company.

That could actually become the case at State Street Financial Center in downtown Boston, which is the sole asset of a business that filed documents with regulators this week to launch an initial public stock offering.

It’s not at all uncommon for a major real estate owner to bundle together office buildings, hotels, or other properties to create a real estate investment trust — and then hold an initial public offering, with share prices based on the underlying value of the assets.

But an IPO for just one building?

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The tower at 1 Lincoln St. was completed in 2003.
The tower at 1 Lincoln St. was completed in 2003.Securities and Exchange Commission

The plan to turn State Street Corp.’s headquarters at 1 Lincoln St. into a public company is extremely rare in the real estate industry and has left many experts scratching their heads.

Among their concerns: Is just one property enough to support a public company and ultimately protect its investors?

“It’s certainly a very different concept,” said Greg Vasil, chief executive of the Greater Boston Real Estate Board, noting that he had never heard of such a transaction in Boston.

“What happens to the value of the investment in a down market? Why shouldn’t investors just invest in the stock market in general, rather than one building?” he said.

It’s also puzzling to Todd Lukasik, a senior analyst at Morningstar Inc. who specializes in REITs.

“It definitely seems a little bit unusual,” he said. “If you have only one building in one market and that market goes south, what do you do? The company’s not diversified.”

Undaunted by such concerns, a venture led by Fortis Property Group of New York, which bought the 1.1-million-square-foot tower for just under $900 million in 2006, would sell a 48.88 percent interest in the building through a real estate investment trust called ETRE REIT, according to documents that were filed with the Securities and Exchange Commission.

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In the documents, ETRE said the State Street tower, built in 2003 and fully occupied by State Street Corp., is currently valued at $1.1 billion.

The move to hold a public stock offering for the building is the idea of ETRE Financial LLC, founded three years ago with the purpose of “facilitating the public listing of individual real estate assets to improve access, liquidity, and transparency in commercial real estate,” according to its website.

A spokesman for ETRE Financial and Fortis Property declined to comment.

This is not the first time that ETRE Financial has tried to take a building public. Less than a year ago, it registered IPO documents for a 12-story building with office and retail space in Washington. The offering was later withdrawn.

Now, ETRE is trying again in Boston. No share values have been set yet for the offering, which is typical in the kind of preliminary documents that were filed Tuesday.

Jonathan Morris, a former executive at Boston Properties Inc., itself a publicly traded real estate investment trust, said that he was fascinated by the concept of taking only one building public. Such a move could allow small, individual investors to profit from ownership in a building.

“I don’t think it’s a bad idea, depending on the terms of the deal,” said Morris, an adjunct professor who teaches about REITs at Georgetown University. But Morris said he would wait for more detailed information before forming an opinion about the Boston offering.

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“It’s all about the details,” he said.


Jay Fitzgerald can be reached at jayfitzmedia@gmail.com