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Deals & Dealmakers

Gramercy, TPG Real Estate form $1B net lease office partnership

Gramercy Property Trust is partnering with TPG Real Estate on a $1 billion spending spree.

The two powerhouse operators announced Monday they have formed Strategic Office Partners, a platform that will aggregate a portfolio of single-tenant office assets in high-growth metropolitan areas in the United States.

Gramercy sold a 75 percent interest in a portfolio of six office assets valued at $187.5 million to TPG Real Estate.

The assets are located in the Los Angeles, San Francisco Bay , San Diego MSA, Nashville and Minneapolis.

The portfolio was sold into the newly formed $400 million equity partnership with capital partner TPG Real Estate in which Gramercy will retain a 25 percent interest.

The partnership will be initially financed with a $200 million non-recourse secured credit facility from Morgan Stanley as well as equity from the partners.

Strategic Office Partners will seek to acquire up to $1 billion in assets over a three-year period.

“We see a compelling investment opportunity in the office net lease sector and believe that this portfolio of high-quality assets in strong growth markets is poised to benefit from positive fundamental trends,” said Avi Banyasz, Partner at TPG and Co-Head of TPG Real Estate.

“We look forward to working with Gramercy, a best-in-class owner and operator, whose extensive experience in the space will prove valuable as we work together to manage and expand the platform.”

Ben Harris, President of Gramercy Property Trust, commented, “We are excited to partner with TPG Real Estate, which is a best-in-class private equity investor.  Gramercy will look to leverage its extensive asset management experience from managing its own portfolio and the portfolios of third party clients to enhance the value of the platform over time.”

The first portfolio purchase is comprised of single-tenant net lease office assets totaling approximately one million square feet. The buildings have an average tenant tenure of over 11 years, and half have been occupied by the original tenant since construction.

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