Dividend Capital to Plunk Down $1.4B for 33-Property Office and Retail Portfolio

Dividend Capital Total Realty Trust Inc. is on the verge of increasing the size of its portfolio by 40 percent in one fell swoop.

May 6, 2010
By Barbra Murray, Contributing Editor

Courtesy Flickr Creative Commons user Dwonderwall

Dividend Capital Total Realty Trust Inc. is on the verge of increasing the size of its portfolio by 40 percent in one fell swoop. The Denver-based REIT has entered into two purchase and sale agreements with subsidiaries of iStar Financial Inc. that will pave the way for its acquisition of an 11.8 million-square-foot office and industrial property portfolio. With a price tag of $1.4 billion, the group of 33 assets will cost approximately $119 per square foot.

If all goes as planned, Dividend’s current 79-property, 13 million-square-foot commercial real estate portfolio will be enhanced with the addition of 22 office properties totaling 5.1 million square feet in 12 markets across the country and 11 industrial properties encompassing 6.7 million square feet in 10 markets. The assets are leased predominantly to a roster of large corporate tenants occupying space under triple net lease agreements.

A billion dollars is a lot more than pocket change, and Dividend–like most real estate companies these days–isn’t exactly sitting on that kind of cash. But, in a demonstration of good faith, the REIT made a $25 million initial earnest money deposit. Now Dividend is sorting out just how it will finance the purchase in its entirety. The company does have some pocket cash that it will use, and it will turn to lenders to cull the remaining funds. Once it has obtained a certain amount of financing, Dividend will have the option of accepting as much as $125 million in mezzanine financing from iStar, as per terms of the agreement.

Nothing, however, is set in stone. Aside from securing a gigantic loan package, Dividend must conclude due diligence and comply with customary closing conditions before the transaction can reach completion. The REIT isn’t making any promises, but it anticipates completing the acquisition in the second quarter of this year.