Columbia Property Trust, Inc. (NYSE:CXP) announced that it has acquired 221 Main Street, a 16-story, 387,943-square-foot, LEED ® Platinum Class-A office tower in San Francisco, California, for a total purchase price of $228.8 million.
The purchase price includes the Company’s assumption of a $73.0 million interest-only loan secured by the property that matures in May 2017 and bears interest at 3.95%. The $155.8 million cash portion of the purchase price was funded from the Company’s $500 million unsecured credit facility and cash on hand. The acquisition is expected to increase Columbia’s leverage (based on debt to gross real estate assets) from 29.3% at the end of the first quarter to approximately 31.5%.
Located in the Spear Street corridor of downtown San Francisco’s South Financial District, 221 Main Street is currently 81% occupied and is expected to have first-year in-place net operating income (NOI) of approximately $7 million. With excellent Bay Bridge and Embarcadero views and proximity to the Transbay Transit Center project, 221 Main Street offers large, highly-efficient floor plates and attractive on-site amenities.
“San Francisco is an important market for us, and over the last two years we have worked to carefully identify acquisitions that could meet our stringent underwriting criteria,” said Nelson Mills, President, CEO and Director of Columbia Property Trust. “221 Main Street offers a compelling opportunity to expand in one of the better performing submarkets in the country, at a substantial discount to replacement cost. With current vacancy and nearly one-third of the space rolling over before 2017 at in-place rents significantly below market, utilizing our leasing expertise should allow us to substantially increase the NOI from this property over the next three years.“Our 2014 objectives call for adding a growth layer of value-add and core-plus acquisitions in select primary markets to what we believe is one of the stronger office portfolios in the country. The acquisition of 221 Main Street meets these objectives and plays to our strengths by increasing an existing presence in San Francisco, providing an opportunity to leverage demonstrated leasing capabilities, and further concentrating the overall portfolio in CBD markets and multi-tenant office buildings. As expected, the flexibility on our balance sheet enabled us to move quickly, accommodate the loan assumption, and still remain at one of the lowest leverage profiles in our sector.”