REAL ESTATE - JP Morgan Asset Management has signed a definitive agreement to acquire Columbia Equity Trust. The deal is set to completed sometime during the first quarter of 2007.
Should this deal go through, it will represent the first time the real estate manager has closed a public to private real estate transaction for its commingled fund, The Special Situation Property Fund.
JP Morgan has had its Vice President Nathaniel Daly work on the transaction. He said, "We are thrilled about this unique opportunity to invest in a diversified office building portfolio located in one of the country’s most desirable and supply-constrained office markets." The region he is talking about is the greater Washington, D.C. area. This is a market that just about every institutional investor is looking for office buildings.
This transaction will not be a one shot deal. Daly said, "We are excited about the opportunity to partner with Columbia’s senior management team to pursue future value-added transactions in the metro D.C. region."
The deal with Columbia Equity Trust calls for a total size of the transaction to be $502m. There is an assumption of debt of around $213m. JP Morgan Fleming will supply the balance of the deal with all cash.
Columbia Equity Trust is an owner, buyer and developer of office buildings in the greater Washington, D.C. area. The company’s portfolio amounts to over 3m s.f. of office space. The vast majority of assets are located in markets like Northern Virginia, suburban Maryland and Washington, D.C.
JP Morgan believed that it would have been very difficult and time consuming to build up this kind of a portfolio on its own. It makes a lot more sense to try to acquire an entire portfolio in one transaction.
JP Morgan and Columbia Equity Trust have done business in the past. The public REIT and the Special Situation Property Fund have an existing joint venture on four office assets totaling around 800,000 s.f. The two companies have a fifth property that is part of a venture with another JP Morgan real estate commingled fund.
The Special Situation Property Fund is an open-ended commingled fund. It currently has a net asset value of $1.9bn. The fund has a wide variety of institutional clients as investors.
The commingled fund has a value-added investment strategy. This can be buying land for new development projects. It also can acquire existing properties and improve them through a new leasing program or a capital infusion.