Duke Spearheads Deals Totaling Nearly $1B

With plans to inch away a bit from the suburban office market and focus on industrial assets, the company has agreed to sell a 3.1 million-square-foot office portfolio to joint venture partner CB Richard Ellis Realty Trust and acquire a 4.9 million-square-foot group of predominantly industrial properties from Premier Commercial Realty.

December 22, 2010
By Barbra Murray, Contributing Editor

Courtesy Flickr Creative Commons user totalAldo

Duke Realty Corp. is making major headway with its portfolio repositioning strategy. With plans to inch away a bit from the suburban office market and focus on industrial assets, the company has agreed to sell a 3.1 million-square-foot office portfolio to joint venture partner CB Richard Ellis Realty Trust and acquire a 4.9 million-square-foot group of predominantly industrial properties from Premier Commercial Realty. Together the two transactions are valued at an aggregate $967 million.

As part of the $516.7 million definitive agreement, Duke Realty will contribute 20 suburban office properties to its existing CBRERT joint venture, of which Duke Realty owns 20 percent. Among the group of buildings is the three-year-old, Class A Norman Pointe II in Bloomington, Indiana. The U.S. General Services Administration signed a lease six months ago for approximately 245,000 square feet in the 332,000 square-foot building designed by the architectural firm of Walsh Bishop Associates. Overall, the 3.1 million square-foot portfolio is 95 percent leased with approximately 72 percent of its square footage located in the Midwest, 17 percent in the Southeast and the remaining 11 percent in the Southwest. The transaction will be executed in two parts, with Duke Realty surrendering seven of the 20 office assets by December 31, and contributing the last 13 by the close of the second quarter of 2011.

Through its transaction with Premier Commercial, Duke Realty will make a big splash in South Florida with the acquisition of 51 industrial properties and five office buildings totaling over 4.9 million square feet with an average occupancy level of 86.7 percent, as well as four ground leases. All of the assets are located in Broward and Palm Beach counties. The $450 million price tag on the deal includes the assumption of $292 million of existing debt with a 5.68 percent weighted average interest rate and maturity dates between 2011 and 2017. If all goes as planned, the transaction with Premier Commercial will close early next year.

Once all is said and done with the CBRERT and Premier Commercial deals, Duke Realty’s portfolio will have shifted from 36 to 42 percent industrial and from 55 percent to 49 percent office. The company’s goal is to transform the makeup of its portfolio to 60 percent industrial, 25 percent traditional office and 15 percent medical office by 2013. Including the recently announced definitive agreements, Duke Realty has made $929 million in acquisitions in 2010 and disposed of $610 million in assets.