NEW YORK — Gramercy Property Trust, a NY real estate investment trust specializing in commercial properties, has launched a new joint venture to acquire, own and manage Class A distribution centers leased to top e-commerce tenants on long-term leases across the country.
The Company is in discussions with several institutional capital partners and has reached an agreement with a sovereign investor to anchor the Venture. The Venture’s first acquisition is a forward purchase contract for $642 million. The Company expects to contribute between 25% and 50% of the equity to the Venture, estimated to be between $64 million and $128 million at target leverage levels. The Company expects to finance the initial acquisition with 55% to 60% property level mortgage debt.
The Venture’s first acquisition is a $642 million portfolio comprised of seven newly constructed Class A bulk distribution properties totaling 6.0 million square feet. The acquisition of the first four properties totaling $360 million is expected to occur during the fourth quarter of 2017. The second tranche of three properties totaling $282 million is expected to occur during the third quarter of 2018. Each building will be 100% leased to a major e-commerce company. The separate leases all have an initial 15-year term with annual 1.75% to 2.00% rental escalations. The buildings are located in Dallas, TX, Inland Empire, CA (2), Jacksonville, FL, the New England I-95 Corridor, Southern NJ and Winchester, VA.
In connection with the acquisition of the Portfolio, the Company will be issuing between 2.7 million and 4.8 million OP Units to the seller as a component of the purchase price. The OP Units for the Portfolio will be priced at $29.19 per share and total between $80 million and $139 million at the current share price.
Britt Winterer, Managing Director and Head of the Company’s Build-to-Suit practice, stated, “We are excited to establish this new venture to target a very interesting opportunity in today’s industrial marketplace. The joint venture will allow us to capitalize on the growing demand for e-commerce distribution facilities across the United States and generate attractive risk adjusted returns for our public shareholders.”