In a joint venture with Garrison Investment Group, Gramercy Capital Corp. closed on the acquisition of a 115-property portfolio for $485 million ($87 per square foot) from KBS Real Estate Investment Trust.
At closing, Gramercy and Garrison collectively capitalized the joint venture, on a 50/50 basis, with an equity investment of approximately $141 million, plus deal expenses. Gramercy funded its portion of the equity contribution with $56 million in cash and the issuance of 6 million shares of common stock to KBS, valued at $15 million at the execution date of the purchase agreement.
The portfolio totals 5.6 million square feet and is comprised of office buildings, branch-office buildings and operations centers. Bank of America leases 81% of the total portfolio and total occupancy is approximately 88%.
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The sale consists of two sub-portfolios.
The core portfolio consists of 67 assets located in 10 states. It is 98% occupied, with 96% leased to Bank of America under a 10.5-year master lease. For 2013, the core portfolio is expected to generate net operating income of $27.2 million. At closing, the joint venture financed the core portfolio with a $200 million first mortgage.
The held-for-sale portfolio consists of 48 assets located in 13 states that are 68% leased to Bank of America.
Concurrently with the purchase of the portfolio, the joint venture sold two multi-tenant office buildings for net proceeds of $144 million. The two buildings sold at closing were a 1 million-square-foot multi-tenant office building in downtown Chicago and a 406,000-square-foot multi-tenant office building in downtown Charlotte.
Proceeds from these sales were used to reduce the capital contributions required by Gramercy and Garrison to fund the joint venture. The joint venture plans to sell the remaining 46 held-for-sale assets over the next 12 to 18 months for expected net proceeds of $50 million. For 2013, the held-for-sale portfolio is expected to generate net operating income of $3.2 million.
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