NEW YORK CITY—Gramercy Property Trust Inc. said late Monday afternoon that it was buying out its joint venture partner, Garrison Investment Group, in a 3.1-million-square-foot portfolio of office properties leased mainly to Bank of America. The deal values the portfolio at about $395 million.
GPT will pay $92.2 million to buy Garrison’s 50% stake in the JV, and will also repay the existing $200-million loan encumbering the portfolio with proceeds from a new, unsecured $400-million credit facility, which it also announced on Monday. Separately, the REIT on Monday said that it would issue 34 million shares of common stock, with proceeds going partly toward the cash portion of the Garrison JV buyout.
Now standing at 67 properties collateralizing the $200-million loan plus three more that are held for sale, the portfolio ran to 115 assets and 5.6 million square feet when GPT and Garrison announced their joint venture in August 2012. The JV acquired the portfolio from a KBS Real Estate Investment Trust Inc. subsidiary for $485 million.
“This agreement begins the implementation of our strategy to create durable, recurring cash flows through the ownership of long-term leased properties,” GPT CEO Gordon F. DuGan said when the JV was announced. GPT and Garrison said at the outset that the JV would sell non-core assets in order to focus on the single-tenant properties long-term leased to BofA, and began doing so shortly after the deal closed. GPT’s acquisition of Garrison’s stake is expected to close by the end of this quarter.
BofA and JPMorgan Chase Bank are providing GPT’s new unsecured credit facility, which replaces its existing facility, with J.P. Morgan Securities and Merrill Lynch acting as lead arrangers. It cosnsist of up to a $200-million senior revolving credit facility with an initial term of four years and a one-year extension option, and a senior term loan of up to $200 million. GPT can increase the amount of the facilities up to a maximum amount of $800 million, in the aggregate, subject to lender approval.