CINCINNATI—A real estate fund managed by New York City-based Apollo Global Management recently acquired the fee-simple interest in an 85% leased, roughly one million square foot office portfolio located in the Cincinnati metro area, from Duke Realty Corp., industry sources say.

The buyer paid $103 million for the properties, mostly located in the town of Blue Ash about 20 minutes northeast of downtown Cincinnati along I-71. The purchase price implies a ~9.3% cap rate on in-place NOI with rents about 6% below market and Apollo's total projected basis after minor capital improvements is projected to be $110 per square foot, or roughly half of today's replacement cost.

In the twelve months preceding the sale, Duke signed leases with Microsoft, General Electric, Del Monte Foods and Cisco Systems, giving the portfolio a number of investment-grade tenants. Blue Ash is one of the top office markets in the metro region, with a class A vacancy rate of just 7%. The suburb is home to many corporate headquarters including the Belcan Corp.; the IT division of Citigroup; Sunny Delight Beverages; F+W Media and Procter & Gamble's Sharon Woods Innovation Center.

The purchased properties include: Deerfield Crossing, a six-story, 320,800 square foot class A office building at 5181 Natorp Blvd. in suburban Mason about eight miles northeast of Blue Ash; Pfeiffer Woods, a three-story, 115,700 square foot class A office building located at 5151 Pfeiffer Rd. in Blue Ash; Lake Forest Place, a 219,750 square foot property at 4445 Lake Forest Dr. in Blue Ash; Westlake Center, a 180,600 square foot property at 4555 Lake Forest Dr. in Blue Ash; Northmark I, a 101,400 square foot property at 10101 Alliance Rd. in Blue Ash; and Remington Park A&B, a 77,400 square foot property at 4370-4380 Malsbary Rd., also in Blue Ash.

Furthermore, shortly after closing this sale, Apollo reached out to Neyer Properties, Inc., a Cincinnati-based developer and investor, and sold it the latter two properties.