UNITED STATES - DRA Advisors has signed an agreement to acquire a majority interest in the office building assets held by Colonial Properties Trust.
The deal is projected to close sometime during the second quarter but should see DRA purchase the properties worth $1.13bn ($835m euros) in a joint venture with the seller.
DLA will hold an 85% interest in the portfolio while the other 15% will be held by Colonial Properties.
The cap rate on the transaction is 6.9% and the return factors in the net operating income of the portfolio for the trailing 12 months.
The portfolio of 26 office properties and two adjoining retail centers – with a current occupancy of 93.7% - is held in the strong suburban markets of the US Sunbelt region, and represents a total space 6.9 million square feet.
DRA’s Senior Portfolio Manager Paul McEvoy said: "We feel that this is a good quality office portfolio. We have done business with this public REIT in the past dating back to 2005."
This transaction is the latest example of a pension fund manager taking some public assets private. These kinds of deals will continue to happen in the marketplace as long as managers continue to raise large amounts of capital and there are high quality portfolios owned by public REITs.
DRA made the investment in the office building portfolio for its latest commingled fund – the DRA Growth & Income Fund VI – which it hopes will see a total capital raising of $1bn. A good portion of the capital will come from pension funds and other institutional investors.
The Colonial Properties portfolio should also give DRA a marketing advantage for the new fund as it will have real hard assets to show potential investors, instead of marketing a blind pool investment fund.
Colonial Properties set up the venture with DRA after deciding it wanted to focus more on its apartment complexes.
But it has also created a second joint venture with Och-Ziff Real Estate Acquisitions. To develop a portfolio of retail properties.
The DLA REIT anticipates 75% to 80% of its net operating income will be with apartment complexes once the ventures are completed.
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