Gramercy Capital Corp. (NYSE: GKK)
announced today that it has closed in a joint venture with Garrison Investment Group (“Garrison”) on the acquisition of a 115-property portfolio (“Portfolio”), for a total purchase price of $485 million ($87 per square foot). The Portfolio was acquired from an affiliate of KBS Real Estate Investment Trust, Inc. (“KBS”). At closing, the Company and Garrison collectively capitalized the joint venture, on a 50/50 basis, with an equity investment of approximately $141 million, plus deal expenses. The Company funded its portion of the equity contribution with approximately $56 million in cash and the issuance of six million shares of common stock to KBS, valued at $15 million at the execution date of the purchase agreement.
The Portfolio totals approximately 5.6 million square feet and is comprised of office buildings, branch-office buildings and operations centers. Bank of America, N.A. (“Bank of America”) leases approximately 81% of the total Portfolio and total occupancy is approximately 88%. The Portfolio consists of two sub-portfolios: The core portfolio (“Core Portfolio”), which consists of 67 assets and the held-for-sale portfolio (“Held-For-Sale Portfolio”) which consists of 48 properties. The joint venture’s strategy is to retain a core net-lease portfolio of high quality assets leased to Bank of America in primary and strong secondary markets and sell non-core, multi-tenant assets.
The Core Portfolio consists of 67 assets located in ten 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 approximately $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 approximately $144 million. The two buildings sold at closing were a one million square foot multi-tenant office building located in downtown Chicago and a 406,000 square foot multi-tenant office building located in downtown Charlotte. Proceeds from these sales were used to reduce the capital contributions required by the Company and Garrison to fund the joint venture. The joint venture plans to sell the remaining 46 Held-For-Sale assets over the next 12-18 months for expected net proceeds of approximately $50 million. For 2013, the Held-For-Sale Portfolio is expected to generate net operating income of approximately $3.2 million.