The Company also announced a plan to potentially market for sale its CDO Management contracts, CDO securities and CDO equity, in whole, part or in joint venture, and has engaged Wells Fargo Securities LLC to assist in the process. The Company is pursuing a sale of the business line as a means to: 1) focus the business on net lease investments; 2) increase its liquidity and capital availability; and 3) decrease its cost structure.
BANK OF AMERICA PORTFOLIO ACQUISITION
In August, the Company formed a joint venture with an affiliate of Garrison Investment Group, to acquire a 115-property office portfolio, or the Bank of America Portfolio, from KBS, for $485.0 million ($87 per SF) including $470.0 million in cash consideration and the issuance of six million shares of the Company’s common stock, valued at $15.0 million at the execution date of the purchase agreement. The purchase price reflects an 8.5% cap rate. The portfolio was previously part of the Company’s Gramercy Realty division, beneficial ownership of which was transferred to KBS pursuant to a collateral transfer and settlement agreement dated September 1, 2011. The portfolio totals approximately 5.6 million rentable square feet with a total portfolio occupancy of 88%. Approximately 81% of the portfolio is leased to Bank of America, N.A., under an 11-year master lease. The Company’s asset strategy for this portfolio acquisition is to sell non-core, multi-tenant assets and retain a core net-lease portfolio of high quality assets in primary and strong secondary markets, primarily leased to Bank of America. The purchase agreement with KBS allowed the joint venture to market for sale non-core assets prior to the closing of the portfolio acquisition. Currently, under contracts for sale to third parties are a 1,000,000 square foot multi-tenant property in Chicago, IL and a 400,000 square foot multi-tenant property in Charlotte, NC, both of which the Company believes are expected to close simultaneously with the portfolio acquisition. The joint venture is expected to finance the acquisition of the portfolio with a non-recourse first mortgage loan of up to $200.0 million provided by a large institutional lender. The loan will be secured primarily by the core portfolio of assets expected to be retained by the joint venture. In addition to the Company’s share of income from the portfolio pursuant to the joint venture agreement, the Company will receive an asset management fee for the portfolio management as well as a performance based fee for management of the portfolio. Assuming the execution of the asset sales and financing, the Company expects to have approximately $75.0 million of equity invested into the joint venture, comprised of approximately $60.0 million in cash and $15.0 million in shares of the Company’s common stock.