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Deals & Dealmakers

Starwood JV to buy suburban office portfolio for $1.12B

Duke Realty Corporation, a leading industrial, suburban and medical office property REIT, announced it is selling its 61-property suburban office portfolio for $1.12B.

The sale to a joint venture of Starwood Capital Group, affiliates of Vanderbilt Partners and Trinity Capital Advisor, is part of the REIT’s previously announced strategy to focus more on industrial and medical properties.

“This transaction is a continuation of our strategy to increase our focus on bulk industrial and medical office properties and to reduce our investment in suburban office assets,ˮ said Denny Oklak, chairman and chief executive officer of DUke Realty Corp.

Duke Realty
Duke Realty has sold several properties in the research triangle.

“The proceeds from this transaction will be utilized to repay debt and to fund our ongoing development activities.”

The portfolio consists of 61 in-service properties, one property that is under development and 57 acres of undeveloped land.

The portfolio, which totals 6.9 million square feet, and 57 acres of undeveloped land, includes all of Duke’s wholly owned suburban office properties located in Nashville, Tenn., Raleigh, N.C., South Florida and St. Louis.

The Indianapolis-based Duke has unloaded several of its office properties in North Carolina research triangle in recent years,

Starwood and it partners will take over the leasing and property management of the Duke properties after the deal closes, which is expected to be in late 2015.

The portfolio sale will reduce the net operating income Duke gets from office properties from 22 percent to 12 percent. The company finished the fourth quarter with in-service portfolio occupancy of 95.3 percent and 4.4 percent in rents growth.

Kirkland & Ellis represented an affiliate of Starwood Capital Group, in a joint venture with affiliates of Vanderbilt Partners and Trinity Capital Advisors, in its agreement to purchase the portfolio from Duke. The Kirkland team included partners Jonathan Schechter, Scott Berger, Rachel Brown, David Rosenberg and Travis Fleming.

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