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Deals & Dealmakers

Duke Realty closes $2.8B sale of 72-building medical office package

Industrial REIT Duke Realty has completed its $2.8 billion sale of 72 medical office buildings to Healthcare Trust of America as it ramps up its bulk-space strategy.

Photo by TheeErin/ Flickr
Photo by TheeErin/ Flickr

With e-commerce expected to continue its growth in 2017 as companies expand “last mile” services, Duke CEO Jim Connor told the recent REIT Week conference that the company is well positioned to thrive in the market and is taking on infill development projects with tenants such as UPS, Amazon, and FedEx.

“I am happy to announce that we have substantially completed the previously announced sale of our medical office business, generating $2.45 billion in proceeds to date, with the remaining properties expected to close during the third quarter,” said Connor in a second quarter results statement.

“This transaction generated significant stakeholder value and positions us for substantial future growth as the leading pure play domestic industrial REIT.”

Duke used some of the sale proceeds to pay down its debts and placed $796 million in escrow to finance future acquisitions and development, according to  Mark Denien, Duke’s chief financial officer.

“These actions will enable us to prudently re-deploy proceeds over time as opportunistic investment opportunities arise,” said Denien.

Last month, Duke purchased a 156,256 s/f industrial facility at 1 Catherine Street in Teterboro, New Jersey from Catellus Development Corporation for an undisclosed price in a deal  brokered by CBRE.

Built in 2015, the state-of-the-art facility sits in the Meadowlands industrial submarket, less than 15 miles from New York City. The property is fully occupied by Lindenmeyr Munroe, a family-owned and operated paper and stacking distributer.

Duke began consolidating its industrial portfolio following the market slump in 2007 and has shed billions in office assets to bring its holdings to 80 percent industrial and 20 percent medical.

From 2010 to 2016 alone, Duke developed 11 million square feet of bulk distribution space for e-commerce.

It owns 130 million square feet worth of space in the nation’s top-tier logistics markets, from New York and New Jersey to California, and  has 2,500 acres of land ready for development.

According to the JLL’s 1Q Northern New Jersey industrial market report, with many retailers and parcel service companies still building out their last mile networks, demand for industrial space near the New York  metro area will remain robust. and Target leased Exit 10’s two largest availabilities last year. Amazon opened its largest fulfillment center in the state in Carteret  and announced plans to open three additional fulfillment centers in Cranbury, Edison and Logan, NJ.

According to JLL,  57.4 percent of the 6.5 million square feet of industrial space currently under construction in New Jersey now pre-leased and rental rates in the northern sector of the state have increased at 18.5 percent in the past year.

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