Brandywine Forms Venture with Allstate Subsidiary to Acquire Office Buildings in D.C.
Office REIT Brandywine Realty Trust formed a joint venture with Current Creek Investments LLC, a wholly owned subsidiary of Allstate Insurance Co., for the ownership and operation of three office properties in metropolitan Washington, D.C. area. The joint venture partners will also allocate $75 million each to pursue additional acquisitions of office properties in targeted submarkets in D.C.
Brandywine provided the initial three assets to the joint venture for $156 million. They include 3130 Fairview Park Drive, a 180,645-sq.-ft. office buildings in Falls Church, Va. with an occupancy rate of 84.5 percent; 3141 Fairview Park Drive, a 183,618-sq.-ft. office building in Falls Church, Va. with an occupancy rate of 82.4 percent; and 7101 Wisconsin Ave., a 223,054-sq.-ft. office building in Bethesda, Md. with an occupancy rate of 99.4 percent.
Brandywine received $120 million from the sale, after $2.9 million in transaction and joint venture formation costs had been taking out. The REIT will use the money to repay outstanding debt under its unsecured revolving credit facility and for general corporate purposes. Brandywine and Current Creek Investments will now each own 50 percent in the three assets.
The transaction closed at a cap rate of approximately 6.8 percent, with GAAP of 7.2 percent based on trailing 12-month results through Sept. 30, 2011. The joint venture secured $90 million in non-recourse loans for the properties. The loans have a weighted-average term of 7.4 years and a weighted-average interest rate of 4.4 percent.
Brandywine will continue to provide property management, leasing and construction management services for the assets. Looking forward, the firm will also be responsible for sourcing additional acquisition opportunities for the venture over a three-year investment period. The joint venture has the capacity to acquire $375 million in new assets, based on a leverage rate of 60 percent. Brandywine can earn promoted interests in the joint venture after achieving pre-determined returns.
“We are delighted to complete this transaction with Allstate,” said Brandywine President and CEO Gerard H. Sweeney in a statement. “They are a well-regarded real estate investor and we look forward to continued expansion of our relationship. This transaction enables us to harvest current value in the contributed portfolio, meaningfully participate in its future appreciation and create a co-investment vehicle with a high-quality partner.”
Keefe, Bruyette & Woods Inc. served as a financial advisor to the REIT for the transaction.
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© 2012 Penton Media Inc.
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