DENVER-For $228 million, a partnership of Callahan CapitalPartners and Morgan Stanley's Special Situations Fund III has solda 70% equity interest in a 2.8-million-sf, five-building Downtownoffice portfolio here that it acquired from Equity Office in Marchfor $770 million in cash and debt. A source with Callahan tellsGlobeSt.com that the value of the portfolio remained unchanged forthe syndication, which brought in two pension funds, Canada'snational pension fund and “a major US pension fund” whose identitywas not immediately available.

Callahan Capital Partners did not reveal the percentage of theequity interest that it sold, but did say it generated grossproceeds of $228 million that it will use to pay down theacquisition debt on the property, which was provided by MorganStanley. Given that CPP Investment Board, which invests Canada'snational pension fund, says it paid $125 million for a 39% stake ofthe equity in the deal, then the total equity in the deal isapproximately $321 million, or 42% of the total value of theportfolio, and the $228 million in gross proceeds represents a 70%equity stake.

The CPP Investment Board's SVP of real estate investments GraemeEadie says the investment helps the pension fund diversify itsportfolio by increasing exposure to top tier US office properties.The other investor in the portfolio is a “major US pension fund”whose identity was not revealed by the parties involved and couldnot otherwise be obtained prior to publishing.