Mid-sized office REIT, Columbia Property Trust, which owns and manages class-A office buildings primarily in high-barrier-to-entry, primary markets, has completed the formation of a joint venture to acquire and manage Class-A office properties located in select gateway markets in the United States.
The two companies have initially contributed three unencumbered properties to the joint venture that have a combined gross asset value of $1.26 billion, and the venture plans to acquire additional Class-A office properties in select gateway markets in the United States.
Columbia contributed two of its properties in the San Francisco Bay area. These include University Circle, a 451,000-square-foot office complex in Palo Alto valued at $540 million, which Columbia acquired in 2005, and 333 Market Street, a 657,000-square-foot office tower in the Financial District valued at $500 million, which Columbia acquired in 2012.
Allianz also simultaneously contributed 114 Fifth Avenue, a 352,000-square-foot office building in Manhattan valued at $220 million that Allianz has owned since 2015 along with its 1% partner, L&L Holding Company. Fully-leased to a strong roster of tenants, this landmark office asset is located in the vibrant Flatiron District of Midtown South and offers attractive historic architecture, tall ceilings and large floorplates throughout the building. The 19-story tower provides sweeping cityscape views and has few approaching capital needs, following a recent $45 million investment in infrastructure and contemporary renovations.
As a result of these transactions, according to a release, Allianz now owns a 22.5% interest in University Circle and 333 Market Street, while Columbia owns 77.5% and will continue to oversee property management and leasing at these two properties, as well as management of day-to-day operations of the joint venture. At 114 Fifth Avenue, Columbia and Allianz each own 49.5%, while L&L retains its general partnership stake and will continue as the property management and leasing agent for this Midtown South building.
Within the next 12 months, Allianz will increase its ownership interest in both University Circle and 333 Market Street to 45%, thereby adjusting Columbia’s ownership percentage in these two properties to 55% and self-funding the venture for Columbia.
“Our joint venture with Allianz is the right vehicle for increasing scale within our core markets,” said Nelson Mills, president and chief executive officer of Columbia Property Trust. “This partnership allows us to increase market presence without issuing stock or raising leverage, and we have found an ideal partner in Allianz, which shares our investment outlook and disciplined, long-term approach to investing. Additionally, with these transactions, we realize a portion of the substantial value we have created within our portfolio.”
“This opportunity reflects the goal of our U.S. team to pursue high-quality, long-term investments with partners that share our vision and ability to create value,” said Christoph Donner, chief executive officer, Allianz Real Estate of America. “In addition to an alignment of our investment strategies, the combination of our highly-experienced and knowledgeable teams of investment and asset management professionals will support growth in the portfolio of our joint investments over time. Columbia is a nimble, long-term investor and the formation of this joint venture further evidences that Allianz is a capital partner capable of seamless execution.”