Gramercy to Buy Garrison’s 50% Interest in $395M Bank of America Portfolio

By Gail Kalinoski, Contributing Editor

Gordon DuGan, Gramercy Property Trust

Gramercy Property Trust is acquiring the 50 percent interest in a $395 million Bank of America office portfolio from its joint venture partner Garrison Investment Group. The New York REIT plans to pay for the 3.1 million-square-foot portfolio with $92.2 million in cash and to repay an existing $200 million loan.

The joint venture comprises 67 properties and three properties that are being sold. Located across the United States, 96 percent of the assets are leased to Bank of America, N.A. The sale is expected to close in the second quarter.

Gramercy said it had signed a commitment letter for a new $400 million senior unsecured credit facility that consists of up to $200 million in a revolving credit facility and an up to $200 million senior term loan. The revolving credit facility has an initial term of four years with an option for a one-year extension. The senior term loan will be used to repay the existing $200 million mortgage for the joint venture properties. Gramercy can increase the amount of the facilities up to $800 million. The credit facilities were provided by lead arrangers J.P. Morgan Securities L.L.C., Merrill Lynch and Pierce, Fenner & Smith as well as JPMorgan Chase Bank, N.A. and Bank of America.

The REIT also announced that it has begun a public offering of 34 million shares of its common stock. The company plans to use part of the net proceeds to pay Garrison for its 50 percent joint interest in the Bank of America portfolio. The remaining proceeds are expected to be used for general corporate purposes, including for future acquisitions and working capital. Morgan Stanley, BofA Merrill Lynch and J.P. Morgan are acting as joint book-running managers for the offering.

Garrison, a middle market credit and asset-based investor with its headquarters in New York City, and Gramercy Property Trust formed the JV in August 2012. The firms bought the portfolio, which at the time consisted of 115 office buildings in 5.6 million square feet, from an affiliate of KBS Real Estate Investment Trust, Inc., for $470 million in cash plus stock valued at $15 million.

Gramercy Property Trust is a fully-integrated, self-managed commercial REIT company that focuses on acquiring and managing income-producing industrial and office properties net leased to high-quality tenants in major markets. It also operates an asset management business that manages CRE assets for third parties, including the Bank of America portfolio.

The firm is led by CEO Gordon DuGan, who was appointed in July 2012, by the board of directors of Gramercy Capital Corp. The company had been operating as Gramercy Capital Corp. since 2004 but changed its name to Gramercy Property Trust in April 2013 to better reflect the firm’s future as a pure-play, net-lease equity REIT.

Under DuGan’s management team, the company has acquired more than 130 industrial and office net-lease properties totaling more than $700 million and 7 million square feet. The Bank of America portfolio was the DuGan team’s first big deal. At the time of the acquisition from KBS, DuGan noted in a release that the agreement “begins the implementation of our strategy to create durable, recurring cash flows through the ownership of long-term leased properties.”