Gramercy Capital Corp. (NYSE:
GKK) has formed a joint venture with an affiliate of Garrison Investment Group and struck a deal to re-acquire full ownership of 115 office buildings from an affiliate of KBS Real Estate Investment Trust.
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The purchase price for the portfolio is $470 million in cash plus six million shares of Grammercy Capital stock valued at $15 million to be issued to KBS at closing.
The portfolio was previously part of the company's Gramercy Realty division, which agreed to transfer ownership of 576 bank branch properties and 291 office buildings to its mezzanine lenders -- Goldman Sachs Mortgage Co., Citicorp and KBS Debt Holdings LLC, which together held a combined $549.7 million senior and junior mezzanine loans on the properties.
The portfolio, which totals 5.6 million square feet, is 81% leased to Bank of America carrying a term ending in June 2023. Total portfolio occupancy equals 88%. The projected 2012 net operating income for the portfolio is $41.5 million.
Gramercy expects the joint venture to leverage the portfolio with 55% to 60% mortgage financing, and also expects to sell some of the assets with the objective of arriving at a core portfolio of primarily single-tenant properties subject to a long-term lease with Bank of America.
"This transaction presents Gramercy with an opportunity to buy a high quality office portfolio primarily leased to Bank of America for $87 per square foot with a 10.9-year remaining lease term and an initial capitalization rate of 8.5%," said Gordon F. DuGan, CEO of Gramercy Capital.
The acquisition is expected to close in the fourth quarter of 2012.
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