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Duke Realty Sells Medical Office Portfolio to Healthcare Trust of America for $2.8B

INDIANAPOLIS — Duke Realty Corp. (NYSE: DRE) has agreed to sell its entire portfolio of medical office properties to Healthcare Trust of America (NYSE: HTA) for roughly $2.8 billion. The transaction is expected to close in stages by year’s end.

The portfolio totals approximately 6.6 million square feet of gross leasable space across 78 properties. Of those, 71 are in-service buildings, five are under construction and two are holdings of unconsolidated joint ventures in which Duke has interests. The sale also includes two parcels of land totaling 16.5 acres.

Collectively, the assets were 94 percent leased at the time of sale.

According to Duke CEO Jim Connor, the transaction signifies the company’s effort to focus exclusively on industrial properties.

“Monetizing our medical office business is accretive to our net asset value per share and creates a more simplified business model with improved transparency,” says Connor. “This represents a long-term benefit to our stakeholders while we position the company as a leading, pure-play industrial REIT.”

Proceeds of the sale will be used to pay off $1.2 billion in existing debt, fund new industrial projects and to pay dividends to shareholders.

The terms of sale call for Duke to provide $50 million in capital for the completion of properties under development. In addition, Duke is requiring that HTA accept seller financing of $330 million in the form of a first mortgage loan. This loan calls for three annual principal payments of $110 million beginning in 2018.

Thirty of the properties representing $1.3 billion of the purchase price are subject to rights of first refusal.

Eastdil Secured, an Atlanta-based division of Wells Fargo, served as financial advisor to HTA in the transaction, while London-based law firm Hogan Lovells provided legal counsel. Morgan Stanley and San Francisco-based law firm O’Melveny & Myers LLP represented Duke.

Duke’s stock price closed at $27.96 per share on Friday, April 28, up from $22.28 per share one year ago. HTA’s stock price closed at $31.89 per share on Friday, April 28, up from $29.46 per share one year ago.

Taylor Williams

 

Content Partners
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