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Monday, 05 August 2019

Piedmont Sees Accelerating Sale of 4 Office Properties

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Commercial Real Estate Direct Staff Report

Piedmont Office Realty Trust Inc., which has been narrowing the geographic focus of its office portfolio to eight markets from 16, is accelerating its plans to sell four office properties that it says have reached their full value.

It's already placed its 500 West Monroe St. office building, with 973,000 square feet in Chicago's West Loop area, on the market through JLL. And soon will bring its 1901 Market St. office building, with 801,000 sf in downtown Philadelphia, and two Houston properties with a total of 601,000 sf to the sales market.

The Atlanta company noted that a potential sticking point in selling 500 West Monroe was the fact that a major tenant at the 46-story building was trying to restructure its lease, presumably to lengthen its current term. That would be a positive in its sales marketing effort. The REIT expects to sell the building by the end of the year.

Piedmont had acquired 500 West Monroe through the foreclosure of $61.1 million of mezzanine debt against the property, which also was encumbered by $140 million of senior financing. The building was 19 percent leased at the time and is now nearly fully occupied.

Because its cost basis is so low, Piedmont might try to defer its tax liability through a tax-deferred exchange. It would do that by plowing any sales proceeds into another purchase or development. Barring that, it would pay a special dividend to its shareholders.

Piedmont, formerly known as Wells REIT Inc., had purchased the 1901 Market building in 2003 for $174 million. The property is fully occupied by Independence Blue Cross under a long-term agreement. It is encumbered by a $160 million mortgage that doesn't mature until 2022.

Brent Smith, who recently replaced the retiring Donald A. Miller as chief executive of the company, said the company's plan was to "accelerate the pace at which we recycle non-core and fully valued assets into value-enhancing acquisitions that continue to build significant market share. And we continue to see a promising pipeline of strategic bolt-on acquisition opportunities with which to redeploy those proceeds." He spoke on a conference call with analysts last week.

He noted the company also would sell its 1430 Enclave Parkway, with 313,000 sf, and Enclave Place, with 301,000 sf, both of which are in Houston.

Last year, it signed a 17-year lease with Transocean for what then was an empty Enclave Place and renewed a lease for 226,000 sf at 1430 Enclave with Schlumberger Technology Corp., stabilizing both properties for the long term.

"Our acquisition and development pipeline resides primarily in the markets of Atlanta, Dallas, Boston and Orlando, and we're actively evaluating (more) of these potential transactions," Smith explained. "We're going to grow the business by recycling capital out of fully valued and non-core assets into financially compelling strategic investments in our core markets."

During the quarter, the company paid $95.1 million for the 414,000-sf Galleria 100 building in Atlanta. The property is 91 percent leased and increases Piedmont's Atlanta portfolio to 2.7 million sf, giving it some pricing power. A number of leases at the property roll in the coming years and market rents are now about $4/sf higher than the actual rents being paid for space at the property.

Comments? E-mail Orest Mandzy, or call him at (267) 327-4281.



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Additional Info

  • Syndicate to Realpoint: No
  • Sector: Office
  • Subject: Property Offerings (OFF)
  • Private: No
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Data Digest

 

CMBS DELINQUENCY VOLUME

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CMBS SPECIAL SERVICING VOLUME

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Top Bookrunners Domestic, Private-Label CMBS - 2017
Investment Bank #Deals Vol$mln MktShr%
Goldman Sachs 17.59 11,819.34 13.68
JPMorgan Securities 14.52 10,968.11 12.70
Citigroup 12.04 10,012.71 11.59
Wells Fargo Securities 14.02 9,936.06 11.50
Deutsche Bank 12.55 9,879.74 11.44

 

RCA CPPI

 

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CMBS 2.0 Spreads

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Top CMBS Loan Contributors - 2017
Lender #Loans Vol$mln MktShr%
Goldman Sachs 146.89 11,719.34 13.63
JPMorgan Chase Bank 117.68 10,114.14 11.76
Deutsche Bank 198.48 9,689.97 11.27
Morgan Stanley 166.18 8,539.78 9.93
Citigroup 199.05 8,088.24 9.41

 

 

 

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