Hines Global REIT Inc. has added the Campus at Playa Vista, a 325,000-square-foot office complex in the Playa Vista neighborhood of West Los Angeles, to its portfolio. The REIT acquired the premier, well-leased asset from Tishman Speyer for $218 million.

It was, roughly, a half-cash, half-debt deal for Hines, which financed the acquisition of the property with proceeds from its it public offerings and a mortgage loan of $115 million.

Developed by Tishman, the Campus at Playa Vista sprouted up on seven acres in the nearly 1,100-acre Playa Vista master-planned community in 2009, offering four four-story office buildings with the addresses of 12015, 12025, 12035 and 12045 East Waterfront Dr. The complex garnered a great deal of attention from the start. In advance of the property’s completion, lead tenant Belkin International Inc. staked its claim to 150,000 square feet for its corporate headquarters in an agreement that will keep the technology manufacturer in its two-building home until fall 2021, and the University of Southern California’s Institute for Creative Technology followed with a deal for 103,200 square feet  under a lease scheduled to expire in 2020.

Today, with a roster of seven predominantly tech-industry tenants, the Campus at Playa Vista is 97 percent leased. It’s a feat that belies the current state of the Playa Vista submarket where, according to a report by commercial real estate services firm Transwestern, the total vacancy rate in the first quarter was 33.4 percent. The vacancy rate for West Los Angeles is 16.4 percent, and in metropolitan Los Angeles it was 16.4 and 18.7 percent, respectively.

“We were attracted to this property due to its strong tenancy, recent construction, excellent access and long-term prospects for this emerging West L.A. submarket.” Doug Metzler, managing director with Hines, said in a prepared statement. “The Lower West L.A. submarket is one of the most attractive office markets on the West Coast.”

The entertainment, media and technology firms take to West Los Angeles like bees to honey, which has led to a steady increase in rents, while rates remain flat for metropolitan Los Angeles, per the report.

And investors are willing to pay the big bucks for West Los Angeles assets. The average office sale price during the first quarter was $300 per square-foot in metropolitan Los Angeles; the average price for the four leading building sales in West Los Angeles was just over $482 per square-foot. The Campus at Playa Vista sold for approximately $670 per square-foot

American Campus Communities, Inc., has begun construction on a 325-unit faculty and staff housing project at Princeton University, its second development at the New Jersey school but the REIT’s first that’s not for students.

The Merwick-Stanworth project, located on two contiguous university-owned sites just north of the main campus along Route 206/Bayard Lane, will be built in phases with completion expected in three years. The first 127 units are slated for delivery by summer 2014 with the remaining 198 units to be ready between late 2015 and summer 2016. They will consist of one-, two- and three bedroom apartment and townhome units and are expected to receive LEED Silver certification.

The dollar amount of the development was not released by ACC or by Princeton University. ACC, an Austin, Texas, based REIT, will develop, own and manage the Merwick-Stanforth housing units through a 70-year ground lease. The deal is being done under ACC’s American Campus Equity (ACE) program, in which ACC serves as the college or university’s sole partner and doesn’t charge them fees up front. ACC gets financial returns through long-term cash flow and benefits of ownership. The REIT has used ACE on other developments including Portland State University, University of New Mexico, Arizona State University and Northern Arizona University, according to an ACC spokesperson. ACE was used on a student housing project at Drexel University, due to open this fall, she said.

“Many factors are taken into account when a university and ACC decide to do a tax-exempt structure or an ACE transaction,” the ACC spokesperson told Commercial Property Executive. “Lately, we’ve seen a pretty even split between the two models.”

While this is ACC’s first faculty and student housing project in the United States, it is the firm’s second development at Princeton University. The REIT is also building the Lakeside Graduate Student Housing project south of Faculty Road. Scheduled for completion in summer 2014, Lakeside replaces the Hibben and Magie apartments and will have capacity for 715 residents in 329 units.

Both developments are part of the University’s Housing Master Plan, which began in 2005 to upgrade campus housing facilities.

“We are honored to help deliver premier housing for Princeton faculty and staff,” Bill Bayless, American Campus CEO, said in a news release. “By providing an affordable housing option with updated amenities and located in a vibrant neighborhood convenient to campus, this community will be a wonderful place to live.”

As part of the municipality of Princeton’s 20 percent affordable housing requirement for new residential projects, apartments for low-and moderate-income families will be included in the Merwick-Stanworth buildings. Those units are available to the general public.

In recent months, ACC, the largest owner, manager and developer of student housing in the U.S., has also made news for purchasing a large portfolio. The REIT picked up a 19-property, 12,049-bed student housing portfolio for about $863 million from Kayne Anderson Advisors, L.P. affiliates. It comprises properties at 14 universities including Michigan State University, Louisiana State University, University of Kentucky, University of Southern California and Virginia Commonwealth University.

Jack Cuneo

By Gail Kalinoski, Contributing Editor

Less than a month after telling shareholders it was exploring ways to provide a “liquidity event,” Chambers Street Properties, a self-managed Maryland REIT, made it official Tuesday, announcing it intends to list its common shares on the New York Stock Exchange. The REIT said it expected to be trading on the NYSE under the ticker CSG on or by May 21.

The REIT, which has its headquarters in Princeton, N.J., also said it was planning a modified “Dutch Auction” tender offer to purchase as much as $125 million of its common shares. Chambers Street would select the lowest price within a range of $10.10 and $10.60. The tender offer will be paid for with funds from its unsecured revolving credit facility.

In an April 2 letter to stockholders, Chambers Street president & CEO Jack Cuneo said the firm had hired Wells Fargo Securities L.L.C. and Citigroup Global Markets Inc. as its financial advisors. He noted listing its shares on a national exchange was a possible outcome as it positioned itself for a “future liquidity event.”

The firm’s board of trustees deemed listing on the NYSE to be “in the best interest of the company and its shareholders,” according to a news release from Chambers Street Tuesday.

“Chambers Street believes that a listing will enable it to continue to execute its asset management, portfolio growth, and capital strategies designed to maximize shareholder value,” the release stated. “Publicly traded real estate companies have enjoyed strong returns in recent years, and companies that own net lease properties, similar to Chambers Street, are trading at attractive valuations. In addition, Chambers Street believes that a listing on the NYSE will provide access to additional potential investors as well as to a broader range of potential sources of capital.”

Because of the pending listing, Chambers Street officials could not comment beyond the firm’s news release.

The plan for public listing comes as the REIT has had a particularly active year since changing its name from CB Richard Ellis Realty Trust last June and moving to self-management. The REIT has about $3.2 billion in real estate holdings in the United States and abroad. It currently owns or has majority interests in 129 properties, mostly industrial and office assets, in 22 U.S. states, Germany and the United Kingdom. As of Dec. 31, 2012, the portfolio was 98 percent leased to 272 tenants, with diversity in locations, industries and lease expirations.

Two weeks ago, Chambers Street said Big O Development Inc., a major tenant at its Summit Distribution Center property in Salt Lake City, had signed a five-year lease renewal. An automotive tire distributor, Big O leases more than 100,000 feet of the 275,000-square-foot center, acquired in 2010 as part of a seven-property industrial portfolio.

Celebration Office Center, Orlando

Chambers Street has made four big acquisitions so far this year, including acquiring the remaining interests in 17 properties it owned in joint venture with Duke Realty Corp. The portfolio, which sold for a reported $98.6 million, comprised 16 office properties and one industrial asset, an 820,000-square-foot warehouse/distribution facility in Phoenix. The office properties included three buildings with a total of 542,000 square feet in Cincinnati and two buildings with a total of 451,000 square feet in Columbus. Other properties were located in Dallas; Fort Lauderdale; Houston; Minneapolis; Raleigh, N.C.; and two in Orlando  – Celebration Office Center and Northpoint III, with a total of 209,000 square feet.

In February, Chambers Street made its first acquisitions in the Philadelphia area, closing on two office buildings totaling 300,000 square feet in Malvern, Pa. The two buildings were developed by Chambers Street, then still known as CB Richard Ellis Realty Trust, and Trammell Crow, a CBRE Group subsidiary, in joint venture and leased to Endo Health Solutions.

L to R: Randall Row (moderator); David Neithercut, Equity Residential president & CEO; Debra Cafaro, Ventas Inc. chairman & CEO; Mchael Fascitelli, Vornado Realty Trust former president & CEO; Roy March, Eastdil Secured CEO

Speaking at the DLA Piper 11^th Global Real Estate Summit in Chicago yesterday, industry movers and shakers remained only cautiously optimistic about the future of commercial real estate, despite several indicators pointing to a rebirth of the field.

“U.S. commercial real estate markets are viewed as stable havens; real estate cap rates will also remain steady,” said Jay Epstien, DLA Piper U.S. Real Estate Practice chair, during the introduction of the conference. “U.S. commercial real estate is on the right track, (but the) question remains, will we not repeat mistakes of the past?”

Several of the panelists speaking at the summit, which one speaker called the “Woodstock of commercial real estate professionals,” commented on the return of commercial mortgage-backed securities showing that commercial real estate lending is back and reflecting good times for borrowers. Even though the CMBS market is nowhere near the $230 billion in sales registered in 2007, it reflects a steady recovery, with $7 billion available in the fourth quarter of 2012. Roy March, CEO of Eastdil Secured, said more than $85 billion is expected, with $30 billion already issued to date, “and this is the bottom line of where loan pricing is today,” he said.

CMBS is seen as a necessity by some. At its prime in 2007, it backed 40 percent of all commercial real estate lending. Nevertheless, some attendees expressed a fear of the return of CMBS, reflecting on the mid-2007 national subprime crisis and subsequent credit squeeze, which shut down the main lending arena for property investment CMBS – sending commercial property prices into a downward tailspin. Still, more loan availability makes CMBS an attractive investment as long as lenders take a serious look at the new rating agency and are willing to do proper due diligence prior to handing over money.

Overall, the real estate debt market is characterized by significant CMBS demand for conduit and single-asset executions, strong demand for life company and bank financing, continuing demand for longer durations (15 to 20 years and more), increasing prepayment flexibility, growing availability of debt for transitional assets, and significant spread tightening.

The current theme in the equity capital markets, according to an Eastdil study March presented during his panel, shows that the market in general continues to be very active and liquid. Cap rates are stable to falling. Pricing has recovered to 2006 levels or higher for most institutional assets. Unique assets continue to draw capital from around the globe. And pricing doesn’t yet fully reflect the strength of the debt markets. The market continues to achieve cash flow, quality and security needs, but it is putting a reasonable spread between trophy and other Class A assets. While there is still a material spread between primary and tertiary markets and assets, the CMBS market is expected to narrow that gap.

Another recurring theme was the strengthening of REITs relative to the private players. REIT balance sheets are the strongest they have ever been, and their cost of capital is at an all-time low. Massive dedicated and non-dedicated inflows and expansion of ETFs are driving markets. And equity issuance volumes have been high, with $130 billion raised since 2009-2010.

“I believe 2013 will also be a record year for equity issuance, at least in the current cycle,” March added.

In addition, IPOs have been successful, especially in off-the-run property types. Merger-and-acquisition activity is likewise expected to grow this year.

In conclusion, debt markets are strong, while CMBS is setting the pace. Public markets continue to increase. CMBS players are financing deals in major markets first but likely to expand into the rest of the top 30 markets, which will create some compression and relative returns. Property pricing does not yet fully reflect strength of the debt markets, particularly pricing in the non-gateway cities. Economically sensitive pricing is improving, according to Eastdil data, but there are still opportunities in “manufacturing to core.” Activity should continue to increase, with 2006/2007 debt maturities that have been extended coming due in 2013/2014. The study did caution against complacency, given how fast rates can change due to continued European challenges, the Middle East turmoil and job growth issues.

“The country is growing—not as fast as we’d like, but we’re better off than other parts of the world,” said David LaRue, president & CEO of Forest City Enterprises, speaking about the risks and rewards of real estate and the public markets. “The U.S. is a great innovator. Uncertainty is holding us back, (but) that will clear eventually.”

A joint venture of Behringer Harvard and CT Realty Investors has sold the Interchange Business Center, a 667,024-square-foot industrial asset in Southern California’s Inland Empire. The purchase price and identity of the buyer—described as one of the nation’s largest privately held real estate advisors—were not immediately disclosed.

Located at 1420-1440 Third St., in San Bernardino, the three buildings sold by Behringer Harvard and CT Realty are situated on a 34-acre site. Interchange Business Center’s fourth property, a multi-tenant office building, was sold last October.

Behringer Harvard acquired Interchange Business Center in November 2010 through its third joint venture with CT Realty, a real estate investment and development firm based in Aliso Viejo, California.

“When we acquired this asset, we believed that Interchange Business Center represented an attractive opportunity to capitalize on market stress by acquiring Class A industrial space in a recovering market at a significant discount to replacement cost,” Jason Mattox, Behringer Harvard’s COO, told Commercial Property Executive. “We expected this asset to benefit from a strong Inland Empire location and superior quality of construction. We believe this property fulfilled our expectations for upside potential.”

According to Mattox, the partners had completed their value creation strategy for the asset, which focused primarily on improving occupancy, so this was an opportune time to sell the property and redeploy the proceeds.

All told, partnerships of Behringer Harvard and CT Realty Investors have acquired and disposed more than 2.4 million square feet of high-quality industrial space in the Inland Empire.

“The Behringer Harvard REIT that invested in Interchange Business Center pursues an opportunistic investment strategy,” he said. “CT Realty has been an outstanding business partner and we are pleased with the attractive returns achieved by our joint ventures.”  The REIT reaped a 12.7 percent annual average return from the sale of the four buildings at Interchange Business Center.

In a step intended to improve financial reporting and transparency of non-traded REITs, the Investment Program Association on Monday announced the first industry-wide valuation guidelines for the investment vehicles.

Kevin Hogan, president & CEO of the Ellicott City, Md.-based trade group for non-listed direct investment vehicles, said that the new guidelines would promote “a higher level of uniformity, consistency and transparency to the financial reporting” and standardization of valuation approaches by non-listed REIT sponsors. That will enable a variety of stakeholders—investors, investment advisors, broker-dealers and securities analysts alike—to assess and compare the vehicles’ valuation and performance more accurately, Hogan added yesterday in a statement.

“We also believe the improved transparency and standardized valuation reporting arising from this Guideline will give a more compelling picture of the capacity of Non-Listed REITs to deliver attractive investment results, which in turn will enhance public confidence in our industry,” Hogan said.

Two years in the making, the guidelines incorporate input from sponsor firms, broker-dealers, due-diligence professionals and legal, accounting and financial advisors, according to the IPA.

Compared to their publicly traded counterparts, non-traded REITs have sometimes been regarded as lacking transparency and adequate yardsticks, such as up-to-date trading market values and other performance metrics.

Highlights of  IPA’s recommendations include:

•  Uniform methodology derived from GAAP principles for determining share values based on net asset value

•  Protocols for managing valuation  and the involvement of independent valuation experts

*  Introduction of valuations earlier in the life-cycle of each non-listed REIT, and

*  Valuation-related disclosures that exceed U.S. Securities and Exchange Commission requirements

Valuation has often been an issue for non-listed REITs. Scott Crowe, managing director and global portfolio manager at Resource Real Estate Partners Inc., noted in the March edition of CPE that given the difficulty investors have in knowing the value of a non-listed REIT’s assets, “There’s been a big push to have much more regular valuation.”

Only time will tell how quickly or fully the IPA’s guidelines are adopted by non-traded REITs and the extent to which investors expect the standards.

In the meantime, though, Stacy Chitty, managing partner at Blue Vault Partners L.L.C., a research and consulting firm specializing in non-traded REITs, told CPE, “We applaud the IPA for their leading efforts in helping provide a solution to this long-term dilemma.”

]]> http://www.cpexecutive.com/finance/seeking-to-boost-transparency-ipa-issues-standards-for-non-traded-reits/feed/ 0 http://www.cpexecutive.com/regions/southwest/kbs-strategic-opportunity-reit-ropes-in-500-ksf-austin-portfolio/ http://www.cpexecutive.com/regions/southwest/kbs-strategic-opportunity-reit-ropes-in-500-ksf-austin-portfolio/#comments Mon, 08 Apr 2013 15:32:21 +0000 annas http://www.cpexecutive.com/?p=1004070053 By Barbra Murray, Contributing Editor 

KBS Strategic Opportunity REIT has increased its office holdings in Austin to approximately 1.5 million square feet with the acquisition of the Austin Suburban Portfolio, a group of three office properties totaling 518,000 square feet. The REIT purchased the Class A and B assets from TPG/CalSTRS Austin L.L.C., a joint venture involving Thomas Properties Group Inc. and pension fund CalSTRS, for $76 million. 

The change in ownership of Park Centre, Westech 360 and Great Hills Plaza comes just more than six months after TPG/CalSTRS came into possession of the three assets with the $859 million purchase of an eight-property, three million-square-foot office portfolio from a venture consisting of Lehman Brothers Holdings Inc., an offshore sovereign wealth fund and TPG/CalSTRS L.L.C., another joint venture between TPG and CalSTRS. 

KBS financed the acquisition of the unencumbered Austin Suburban Portfolio with proceeds from its initial public offering, which commenced in 2010.

The largest of the assets, Park Centre, is also the newest. Consisting of three buildings, the 203,200-square-foot complex was developed in 2000. Built in 1986, Westech 360 features four structures totaling 175,500 square feet, while the three-story Great Hills Plaza opened its doors in 1985 with 139,300 square feet. 

The portfolio is presently 75 percent leased, which does not reflect the current status of the office market in Austin, where the consistently decreasing vacancy rate dropped to 15 percent at year’s end, according to a report by commercial real estate services firm NAI REOC Austin. However, the properties are positioned to benefit from their location in the city’s improving suburban submarket.

“What’s driving the demand is some of the major relocations that have been announced coming into the area, and the high-tech sector is booming and other industries that utilize office space have really started to take hold,” Bob Rein, associate vice president with NAI REOC Austin, told Commercial Property Executive. “So what’s happening in the CBD is while there are still properties, they’re usually big blocks of office space so smaller users are having a tougher time in the CBD, and that’s forcing them to go north, south, and west to find quality office space.” 

For the Austin Suburban Portfolio, time will tell. The average remaining lease term for the tenants is approximately three years and the current weighted-average annual rental rate for the remaining lease term is $14.01 compared to–according to the NAI report–the $26.53 per square-foot asking rate citywide. “When you have decreasing vacancies, you have rising rents,” Rein said. “Rates haven’t gone up that much but some of the freebies are tightening up a little bit.”

Riverside Center

Hines Global REIT, Inc., has acquired Riverside Center, a 510,000-square-foot, three-building office complex, in the Boston suburb of Newton, Mass., from Equity Office Properties for $197.3 million.

The office property at 275 Grove St. is 97 percent leased on a long-term basis to a diverse group of tenants including the world headquarters of e-publishing company Tech Target and the pharmaceutical giant McKesson Corp.

Hines will manage the property for Hines Global REIT.

This is the third acquisition made by Hines Global REIT in the Boston area in recent years. In 2011, it acquired 250 Royall St. in Canton, Mass., a three-story, 185,171-square-foot building, and the Campus at Marlborough in Marlborough, Mass. , a three-building complex with 532,246 square feet.

“Boston is a market that Hines Global REIT has targeted for investment because of its diverse economy and highly educated workforce,” Sherri Schugart, president and CEO of Hines Global REIT, said in a news release. “Riverside Center is a well-located, quality asset with strong tenancy that will fit well within our portfolio.”

The acquisition was funded with proceeds from Hines Global REIT’s revolving credit facility and proceeds from a bridge loan made by JPMorgan Chase Bank, N.A. It has a maximum borrowing amount of $150 million, according to a filing the REIT made with the U.S. Securities and Exchange Commission.

Completed in 2000, Riverside Center is comprised of three four-story buildings. It has a café, fitness center and parking for 1,500 vehicles. It is adjacent to Riverside Station on MBTA’s Green line and near the Mass Pike/Route 128 interchange. The site is just 15 minutes from downtown Boston and Logan International Airport.

“The Route 128 Central submarket has proven to be one of the strongest suburban office markets in the nation due to its high barriers-to-development and close proximity to downtown Boston and Cambridge, as well as easy access to and from the most affluent communities in the metro area,” David Perry, senior managing director of Hines’ Boston office, said in the release.

The submarket saw average rent of $25.63 at the end of 2012, according to Cassidy Turley’s MarketWATCH Boston fourth-quarter 2012 report. Cassidy Turley noted that the Route 128 Central submarket had a vacancy rate of 12.3 percent, lower than the 15.4 percent overall average for the entire Boston suburban region. With a total inventory of 35,062,173 square feet of office and R&D space in the submarket, about 6.9 million square feet was available at year-end.

Hines Global REIT, is a public, non-listed REIT sponsored by HINEs that owns interests in 30 real estate investments in the United States and abroad. Some of the REITs more recent acquisitions have been in Europe and Australia. Last month, the REIT spent more than $215 million acquiring One Westferry Circus, a nine-story office and retail property in London, and 465 Victoria, a 15-story office building in Sydney’s Chatswood Central Business District. In February, the REIT bought the Mercedes-Benz Bank Building in Stuttgart, Germany, for $69.8 million.

ARCP Chairman & CEO Nicholas Schorsch vs. Cole Holdings Executive Chairman Christopher Cole

The war of words between American Realty Capital Properties and Cole Credit Property Trust III continues to get more heated with each side issuing statements detailing why their proposals about the future of CCPT III are best for stockholders.

The latest volley came this morning with ARCP issuing a six-page press release responding to Thursday’s two-page letter to “valued business partners” that Cole Holdings officials filed with the U.S. Securities and Exchange Commission. In that letter, signed by Christopher H. Cole, executive chairman of Cole Holdings Corp., and Marc Nemer, president and CEO of Cole Holdings Corp., detailed why a Special Committee of their board rejected the unsolicited offer ARCP made Tuesday to buy CCPT III in a cash and stock deal worth up to $9 billion in an effort to create the largest publicly traded net lease sector REIT.

Today, ARCP reiterated its belief that its offer to buy CCPT III is better for stockholders and that the stockholders should have a say in the matter.

“None of Cole’s assertions can disguise the fact that ARCP’s proposal provides CCPT III stockholders with certainty of execution, timing and value in an 80 percent stock, 20 percent cash transaction,” ARCP fired back this morning. “CCPT III stockholders who elect to receive ARCP common stock will have unlimited upside and a floor of $12 per share (cash elections will receive $12 per share). This proposal represents at least a 20 percent premium to the original CCPT III offering price of $10 per share, with no lock-up and immediate liquidity for CCPT III stockholders.”

CCPT III is planning to acquire Cole Holdings Corp., its sponsor and a real estate management firm. In the Thursday letter, Cole and Nemer affirmed that decision and tore into the ARCP proposal. The letter noted that separate from the Special Committee, Cole Holdings also evaluated the ARCP offer and “concluded that the proposal is misleading and was not put forward in an effort to foster serious consideration – to the contrary, the proposal appears to have been made in a manner deliberately designed to disrupt the businesses of Cole Holdings and CCPT III.”

The Cole letter criticized ARCP for making its offer public only 12 hours after sending it to the CCPT III Board of Directors. It also stated that ARCP “attempted to mischaracterize a transformational transaction between CCPT III and Cole Holdings as an‘internalization.’

“The reality is that CCPT III will actually own a profitable, full-scale real estate investment management platform, with more than 350 employees, that currently manages more than 2,000 properties and more than 76 million square feet across 47 states,” the Cole Holdings officials said.

Cole and Nemer stated, “ARCP’s clear distortion of the facts for the purpose of interfering with and disrupting the efforts of their competitors is not surprising. Attempts to purposely create chaos and confusion in the marketplace for personal gain are simply inexcusable as everyone suffers – our broker-dealer clients, our investors and the industry-at-large.”

In today’s press release, ARCP denied that it went public after only giving CCPT III officials 12 hours to consider its offer. ARCP said its management had expressed interest in acquiring CCPT III numerous times over the past two months to Goldman Sachs, CCPT III’s financial advisor, and then directly to the board of directors and management. ARCP stated that no one connected with CCPT III had made an effort to communicate with its management or advisors to “thoroughly review, analyze or negotiate the ARCP proposal in the best interests of the CCPT III stockholders.”

One of the issues in dispute is Cole’s contention that CCPT III’s acquisition of Cole Holdings would be a transformational transaction while ARCP calls it an internalization. In its press release today, ARCP stated: “Cole asserts that its ‘transformational transaction’ (at a cost in excess of $120 million paid by CCPT III stockholders) will result in CCPT III owning a “profitable, full-scale real-estate investment management platform.” ARCP then wrote in bold print, “This is, in fact, the very definition of an internalization.”

ARCP went on to detail what it estimates CCPT III would receive upon a successful listing, stating it would be about $258 million, plus an “undeterminable earn out,” adding it would be a “transformational transaction” for Cole but not for its stockholders.

In its Thursday letter attacking the ARCP proposal, Cole and Nemer said ARCP omitted key facts, including that it’s privately owned external manager would be a primary beneficiary of the proposal. The two men stated reliance on an external management structure “is viewed unfavorably by the institutional public markets.” They claimed the ARCP external management team “has a mixed track record and no history with approximately 75 percent of the combined portfolio.”

The ARCP statement today addressed that assertion by saying there are successful examples of externally managed public companies, including REITs. ARCP pointed to its launch of a $70 million IPO as an externally managed REIT in September 2011 and added that it raised $134 million in follow-on and preferred offerings and executed a $3.1 billion merger.

The REIT went on to say that institutional markets have “embraced ARCP’s low-cost, external management structure, where acquisition and financing fees have been eliminated and asset management fees were structured to remain significantly below industry averages.”

ARCP added that the board of directors has the option to internalize management any time if there is a stockholder benefit.

Cole had listed several other reasons for rejecting the ARCP proposal including:

•    CCPT III has a “superior asset portfolio” and combing the two portfolios would be dilutive to CCPT III;
•    ARCP’s proposed exchange ration undervalued CCPT III in an approach that “defies financial logic;”
•    The cash component of the ARCP proposal would result from leveraging the CCPT III balance sheet,   eventually leading to future dilution to the CCPPT III stockholders.

In today’s response, ARCP attacked those reasons point by point. It defended its “best-in-class” portfolio, noting it comprised 692 properties with 16.4 million square feet worth about $3.1 billion as of Feb. 28. ARCP said 79 percent of its 49 tenants were investment grade and that it was located in 44 states and Puerto Rico. Average remaining lease term is 11.5 years.

ARCP said it was offering a minimum 20 percent premium potential upside to the original CCPT III offering price of $10 per share. The REIT said the only thing that “defies financial logic” is the refusal by all the CCPT III parties to consider ARCP’s offer.

ARCP said it is one of the lowest leveraged REITs in the net lease sector. It also added its proposal would be fully funded and immediately available under ARCP’s existing credit facility which was recently expanded.

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22535 Colonial Pkwy, Houston

Chambers Street Properties has acquired the remaining interests in 17 properties it owned in a joint venture with Duke Realty Corp., for a reported $98.6 million as Duke continues to divest many of its office holdings to focus more on industrial assets.

The price paid was Duke’s 20 percent of the portfolio estimated at $493 million, according to the Triangle Business Journal in Raleigh, N.C. The portfolio consisted of 16 office properties and one industrial asset – Goodyear Crossing Industrial Park II, an 820,000-square-foot warehouse and distribution facility in Phoenix.

“This is a mutually agreeable transaction which has conveyed full ownership and control of 17 high quality commercial properties in markets where Chambers Street currently operates,” Philip L. Kianka, executive vice president and COO of Chambers Street, said in a company release.

The office properties are: The Landings I and II and McAuley Place, three buildings with a total of 542,000 square feet in Cincinnati; Atrium I and Easton III with a total of 451,000 square feet in Columbus; Point West I, a 183,000-square-foot property in Dallas; Miramar I and II, with a total of 223,000 square feet in Fort Lauderdale, Fla.; 22535 Colonial Parkway, a 90,000-square-foot building in Houston; Norman Pointe I and II, totaling 537,000 square feet in Minneapolis; Celebration Office Center and Northpoint III, totaling 209,000 square feet in Orlando, Fla.; and 1400 Perimeter Park Drive, 3900 N. Paramount Parkway and 3900 S. Paramount Parkway, totaling 265,000 square feet in Raleigh.

“The transaction is in keeping with our fundamental investment strategy while still allowing us to continue with our successful relationship with Duke Realty on the remaining assets held by the JV,” Kianka added.

Chambers Street, formerly known as CB Richards Ellis Realty Trust, is a Maryland-based REIT with its headquarters in Princeton, N.J. The REIT continues to have joint ventures with Duke in approximately 20 properties, most of them office but a few warehouse and distribution facilities including Buckeye Logistics Center in Phoenix and Fairfield Distribution Center IX in Tampa, Fla. The joint venture partnership between the two REITs began in 2008 and most of the JV properties were acquired between 2008 and 2011, according to a portfolio list on the Chambers Street website. Of the remaining JV properties, Chambers Street owns 80 percent and Duke owns 20 percent.

Duke, an Indianapolis-based REIT, has stated its long-term goal is to have 60 percent of its holdings in industrial, 25 percent in office and 15 percent in medical office holdings. As of Dec. 31, 2012, Duke’s portfolio, based on gross investment dollars, was 51 percent industrial, 29 percent office, 16 percent medical office and 4 percent retail, according to its 2012 fourth-quarter and full year filing with the U.S. Securities and Exchange Commission. The filing also noted that based on net operating income, Duke’s portfolio mix was 54 percent industrial, 30 percent office, 13 percent medical office and 3 percent retail at the end of last year. It currently owns and operates more than 145.6 million rentable square feet of industrial and office space in 18 U.S. cities and regions, including Atlanta, Baltimore, Chicago, Dallas, Houston, and southern Florida and southern California.

Chambers Street focuses on acquiring and managing high-quality corporate real estate with long-term leases in the United States, Europe and the United Kingdom. It currently has a portfolio of 129 properties in more than 40 markets. Most are in the U.S. with six in Germany and seven in the U.K. It also has an investment with institutional partners that includes interest in eight properties in China and Japan. The REIT’s most recent acquisitions have been in the U.S., including the purchase last month of two office buildings near Philadelphia that it had developed in 2012 with Trammel Crow. The two five-story, Class A buildings are located in Malvern, Pa., and have a total of 300,000 square feet.