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Thomas Properties Group, Inc. (NASDAQ:TPGI) today announced that it and California State Teachers’ Retirement System (“CalSTRS”) have jointly acquired an eight-building, three million-square-foot portfolio of office properties in downtown and suburban Austin, Texas. The portfolio was purchased from TPG-Austin Portfolio Syndication Partners, a venture among Lehman Brothers Holdings Inc. (50%), an offshore sovereign wealth fund (25%) and TPG/CalSTRS, LLC (25%).
Thomas Properties Group and CalSTRS have formed a new venture, known as TPG/CalSTRS Austin, LLC, to own the Austin portfolio. Thomas Properties Group’s subsidiary is the managing member with a 50% interest and CalSTRS owns the remaining 50% interest.
Concurrently, Thomas Properties Group has entered into an agreement with an affiliate of Madison International Realty whereby its affiliate will acquire a one-third interest in Thomas Properties Group’s subsidiary that owns the interest in TPG/CalSTRS Austin, LLC. Thomas Properties Group is the managing member of the subsidiary and will act on its behalf as the manager of TPG/CalSTRS Austin, LLC.
The portfolio was purchased for $859 million before prorations and adjustments. As part of the purchase price, TPG/CalSTRS Austin, LLC assumed five existing first mortgage loans totaling $626 million. The transaction reduced the existing leverage on the portfolio by repaying approximately $200 million owed to Lehman Commercial Paper, Inc. Thomas Properties Group retains all operating responsibilities for the properties and the existing Austin leasing and management team will remain in place.
Thomas Properties Group Chairman and CEO James Thomas said, “In keeping with our strategic plan to acquire wholly-owned or equally-controlled properties that are accretive to our after tax cash flow, we are pleased with the opportunity to increase our investment in Austin and more particularly, in a group of assets that we consider to be crown jewels. We are very encouraged by the continued strength in the Austin market and the prospects for future growth.”