NEW YORK CITY — Gramercy Capital Corp. (NYSE: GKK) and Garrison Investment Group have formed a joint venture to acquire 100 percent of the membership interests in entities owning 115 office buildings from an affiliate of KBS Real Estate Investment Trust. The purchase price for the portfolio includes $470 million in cash, plus the issuance of six million shares of Gramercy’s common stock, valued at approximately $15 million, upon closing.
The office portfolio, which totals 5.6 million square feet, is 81 percent leased to Bank of America through June 2023. The joint venture plans to leverage the portfolio with approximately 55 to 60 percent mortgage financing.
“This transaction present Gramercy with an opportunity to buy a high-quality office portfolio primarily leased to Bank of America for $87 per square foot with a 10.9-year remaining lease term and an initial capitalization rate of approximately 8.5 percent,” says Gordon DuGan, CEO of Gramercy.
The joint venture plans to identify and market for sale certain non-core assets with the objective of arriving at a core portfolio of primarily single-tenant properties subject to a long-term lease with Bank of America.
“This agreement begins the implementation of our strategy to create durable, recurring cash flows through the ownership of long-term leased properties,” DuGan says. “We are very excited to enter into this venture with Garrison Investment Group and will be working diligently with out partner to close the transaction during the fourth quarter of this year.”
Gramercy’s stock price closed at $2.53 per share on Monday, up from $2.42 per share a year earlier.
— Savannah Duncan