Gramercy Grabs Portfolio from Dividend Capital for No Small Change
- Mar 13, 2015
Gramercy Property Trust Inc. has acquired an office and industrial portfolio of 12 single-tenant net lease assets totaling approximately 2.7 million square feet from Dividend Capital Diversified Property Fund Inc. for $398.6 million.
The portfolio consists of six office properties comprising 1.1 million net rentable square feet, including three office properties in Los Angeles, and one each in Northern New Jersey, Miami, and Dallas. It also includes six industrial properties comprising 1.6 million net rentable square feet, with properties in Los Angeles, Dallas, Cleveland, Ohio, Chicago, Houston, and Denver.
In connection with the deal, Gramercy Property Trust assumed an existing secured debt totaling nearly $128 million with remaining term of 5.3 years until maturity. The loan encumbers 11 of the 12 assets in the portfolio.
According to a company release issued by Gramercy Property Trust, Year 1 net operating income on the entire portfolio is anticipated to be approximately $31.6 million with a weighted average lease term of approximately 6.4 years.
Gramercy Property Trust also said that it’s pursuing lease extensions with two tenants where, if successful, the weighted average lease term for the portfolio would increase to more than eight years.
Shares of Gramercy Property Trust have posted positive gains of 1.62 percent in the last four weeks, outperforming the index during that time by 0.84 percent.
Gramercy is no stranger to acquisitions of this size. Last May, it acquired the 50 percent interest in a $395 million Bank of America office portfolio from its joint venture partner Garrison Investment Group.
According to Cushman & Wakefield’s Global Office Forecast 2015-16, most U.S. cities are experiencing economic expansion, which is translating into strong office market fundamentals with most U.S. markets seeing modest increases in rent.
Additionally, CBRE Research’s 2015 U.S. Industrial Outlook reported that the four-year recovery of the U.S. industrial real estate market is poised to continue in 2015, with demand again projected to outpace supply, availability continuing to decline and rents rising.
“There is still plenty of upside for the industrial market, particularly for rental growth. Both cyclical demand drivers—GDP growth, expanding manufacturing sector—and structural demand drivers—e-commerce, supply chain evolution—will promote strong user demand across geographies and product types,” Scott Marshall, CBRE’s executive managing director, industrial services, said in the report.
DPF’s net proceeds from the sale will be used to repay borrowings on revolving credit facility and for general corporate purposes. DPF now owns 19 office properties totaling approximately 4 million square feet, six industrial properties totaling approximately 1.9 million square feet, and 32 retail properties totaling approximately 3.3 million square feet.