Columbia Property Trust has formed a $1.3 billion joint venture with Europe’s biggest insurer to acquire and manage trophy US office towers.
Columbia and Allianz Real Estate announced that the joint venture will target Class-A office properties located in select gateway markets in the United States.
“Our joint venture with Allianz is the right vehicle for increasing scale within our core markets,” said Nelson Mills, president and CEO 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.
The two companies have initially contributed three unencumbered properties to the joint venture that have a combined value of $1.26 billion.
Columbia contributed University Circle, a 451,000 s/f office complex in Palo Alto valued at $540 million, which it acquired in 2005, and 333 Market Street, a 657,000 s/f San Fran office tower woth $500 million, which it acquired in 2012.
Allianz simultaneously contributed 114 Fifth Avenue, a 352,000 s/f office building in Manhattan valued at $220 million that Allianz has owned since 2015 along with its one percent partner, L&L Holding Company. Fully-leased to a strong roster of tenants, the landmark office asset is located in the Flatiron District.
The 19-story tower recently underwent a $45 million investment in infrastructure and contemporary renovations.
As a result of these transactions, Allianz now owns a 22.5 percent interest in University Circle and 333 Market Street, while Columbia owns 77.5 percent and will continue to oversee property management and leasing at the 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 percent, while L&L retains its general partnership stake and will continue as the property management and leasing agent for the Midtown South building.
Within the next 12 months, Allianz will increase its ownership interest in both University Circle and 333 Market Street to 45 percent, thereby adjusting Columbia’s ownership percentage in these two properties to 55 percent and self-funding the venture for Columbia.