California-Based REIT Doubles In Size Through Purchase of Primarily Single-Tenant, Triple-Net Leased Office Portfolio
Griffin Capital Corp. has acquired an 18-property office portfolio totaling 4 million square feet spread across 12 markets in 11 states for $521.5 million.
The El Segundo, CA-based privately held real estate investment firm acquired the predominantly single-tenant office portfolio, triple-net leased portfolio from Atlanta-based Columbia Property Trust on behalf of Griffin Capital Essential Asset REIT, a non-traded real estate investment trust.
Key Bank, N.A provided a $300 million term loan, of which $282 million was initially drawn and the remaining $18 million held for future costs. The balance of the acquisition was funded with $250 million of preferred equity provided by an affiliate of Starwood Property Trust.
Will Yowell, Justin Parsonnet and Jay O’Meara of CBRE’s Atlanta office marketed the national office portfolio for Columbia Property Trust.
With the acquisition, the REIT nearly doubled its holdings and now owns 41 properties with a total capitalization of more than $1.3 billion. More than 80% of the portfolio's operating income is generated from firms Griffin Capital considers investment-grade quality. The transaction includes the following assets:
ATLANTA: 2500 Windy Ridge, 4100, 4200 & 4300 Wildwood
CINCINNATI: 4241 Irwin Simpson Road and 8990 Duke Boulevard
COLUMBUS: Chase Center Columbus and Sterling Commerce Center I and IV
DALLAS: 4300 Centreway Place and One MacArthur Ridge
DETROIT: 333 & 777 Republic Drive
INDIANAPOLIS: College Park Plaza
MILWAUKEE: 11200 W. Parkland Ave.
NASHVILLE: One Century Place
NEW JERSEY: Eagle Rock Executive Office Center IV
PHILADELPHIA: 1200 Morris Drive
SEATTLE: 15815 25th Avenue West and 16201 25th Avenue West
ST. LOUIS: 13655 Riverport Drive
Griffin Capital's chief investment officer Michael Escalante said the strategy behind the Essential Asset REIT is to own properties that serve as "essential assets" for the tenant, such as national and regional headquarters buildings, primary research & development facilities, and key business servicing centers.
"We believe that these properties can provide steadier cash flow, and a higher probability of lease renewal at maturity as compared with commodity-type assets," said Escalante.
For Columbia Property Trust, the publicly traded successor to Wells Real Estate Investment Trust II, the sale supports the REIT's ongoing efforts to reposition its portfolio, from owning assets in 31 markets in 2011 to 16 now, and reducing its exposure in suburban locations in favor of CBD.
The Atlanta-based REIT said it would use the nearly $500 million in net proceeds from the sale to pay down a $90 million mortgage loan on one of the properties, reduce its outstanding debt, and fund the company's previously announced tender offer of common shares, as well as future acquisitions.
"This transaction substantially increases our concentration in our top 10 markets, reduces our exposure to suburban markets and raises our percentage of multi-tenant properties," noted Nelson Mills, president and CEO of the REIT.
Please see CoStar COMPs #2880986 for more information on the transaction.