EL SEGUNDO, CA-GlobeSt.com has learned exclusively that Griffin Capital Corp. has acquired an 18-asset, roughly 4-million-square-foot office portfolio from what the firm tells us is Columbia Property Trust for approximately $521.5 million on behalf of Griffin Capital Essential Asset REIT Inc. The predominantly single-tenant portfolio is triple-net-leased to many prominent Fortune 500 companies, and the transaction nearly doubles the size of the REIT, which now owns 41 properties, with a total capitalization in excess of $1.3 billion.
More than 80% of the portfolio’s operating income is generated from investment-grade tenants, or tenants whose parent companies have investment-grade ratings, such as Coca-Cola Refreshments USA, JPMorgan Chase, General Electric Co., Wells Fargo Bank, Aetna Life Insurance, IBM and United Healthcare Services. The portfolio spans across 12 major US markets in 11 states.
Financing was provided by a $300-million term loan led by Key Bank N.A., of which $282 million was initially drawn and the remaining $18 million held back for future specific releasing coasts. The balance of the acquisition was funded with $250 million of preferred equity provided by an affiliate of Starwood Property Trust Inc.
CBRE represented the seller out of its Atlanta office, and Barclays served as financial advisor to the REIT.
According to Kevin Shields, Griffin Capital’s chairman and CEO, since “the vast majority of the buildings [are] leased to iconic, blue-chip tenants, this is an ideal fit for Essential Asset REIT. With this transaction, this REIT almost doubles in size, but far more important is the high-quality assets and increased diversification this portfolio provides. Essential Asset REIT now includes tenants representing 33% of the DOW 30.”
Michael Escalante, Griffin’s chief investment officer, adds, “The other very attractive aspect of this portfolio is the high percentage of properties that serve as business essential assets for the tenant. As in our current portfolio, these essential assets include national and regional headquarters buildings, primary research & development facilities, and key servicing centers—we believe that these properties can provide steadier cash flow and a higher probability of lease renewal at maturity as compared with commodity-type assets. The portfolio also includes leases with attractive embedded annual increases, which we feel can provide some measure of inflation protection that flat leases, common in drugstore and certain retail acquisitions, cannot.”
As GlobeSt.com reported exclusively last week, Griffin Capital has purchased the recently reconstructed, 82,645-square-foot, class-A creative-office building at 16752 Armstrong Ave. in Irvine on behalf of Griffin Capital Essential Asset REIT Inc. The property, located in the Irvine Business Complex adjacent to the master-planned Tustin Legacy development, was acquired from a partnership between Penwood Real Estate Investment Management and Shubin Nadal for $27.2 million.
Converting a former industrial building into creative-office space may have helped the property sell. The recent deal was transacted after the owner completed the renovation and repositioned the asset.