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| Duke Realty’s Baylor McKinney 2 MOB in McKinney, TX, is among those being sold to Healthcare Trust of America. |
Healthcare Trust of America, Inc. (NYSE: HTA) is buying all of the medical office buildings owned by Duke Realty Corp. (NYSE: DRE) and its medical development pipeline for $2.75 billion in cash. The price breaks down to roughly $450/square foot.
The transaction includes $2.35 billion for 64 stabilized, operating medical office properties and $400 million for 14 properties under development or in the lease-up stage.
The consolidated portfolio includes 78 properties overall that contain 6.1 million square feet of gross leasable area that are 94% leased, including Duke’s proportionate interest in two unconsolidated joint venture entities. The acquisition also includes two development land parcels totaling 17 acres.
The combination will increase HTA’s portfolio to 25 million square feet of medical office space.
“This transaction solidifies HTA as the dominant owner and operator of medical office buildings located in key, gateway markets in the United States,” said Scott D. Peters, chairman and CEO of Scottsdale-based HTA.
Approximately 85% of the properties are located in HTA’s existing markets. HTA said the overlap should result in “substantial operating synergy opportunities” for property management, leasing and development.
The transaction is expected to close in several tranches in the second and third quarter of 2017. The final size of the deal could vary as 31 of the properties are subject to rights of first refusals or offer, which could reduce the size of the acquisition or delay the timing of the closing.
As part of the agreement, Duke is requiring that HTA accept seller financing of $330 million, in the form of a senior secured first mortgage loan, which will bear interest at 4% per year. This note will require three annual principal payments of $110 million beginning in 2018 and is not prepayable.
Healthcare Trust of America said it will finance the remainder of the purchase price through the sale of common stock.
HTA priced the offering of 47.5 million shares at $28.50 per share. The offering was upsized from an original offering size of 39.5 million reflecting strong investor interest. In addition, the underwriters have a 30-day option to purchase up to an additional 7.125 million shares. HTA will receive approximately $1.35 billion in gross proceeds from the offering.
[Editor’s Note: This story was updated Wednesday afternoon May 3rd with the news of the upsized offering and additional details on Duke Realty below.]
Wells Fargo Securities and its subsidiary, Eastdil Secured, are acting as exclusive financial advisors to Health care Trust of America, and O’Melveny & Myers LLP, San Francisco, is acting as its legal counsel to the company in connection with the transaction.
Hogan Lovells US LLP is legal adviser to Duke Realty in the sale.
Upon announcement of the MOB portfolio sale, Duke Realty announced a series of new industrial property investments.
In South Florida, Duke acquired three, newly constructed industrial buildings totaling 676,835 square feet in the Hialeah Gardens submarket of Miami, raising its portfolio in the market to 5.9 million square feet. The three buildings, which are located on the east side of Florida’s Turnpike at U.S. 27, collectively will be named Miami Industrial Logistics Center.
The purchased properties include:
10701 NW 140th St., 255,846 SF
14802 NW 107th Ave., 209,232 SF
15002 NW 107th Ave., 211,757 SF
The Northeast region office of Duke purchased 72.87 acres in Bethel Township in Berks County, Pennsylvania, for future development. The land known as Central Logistics Park, fronts I-78. When Duke Realty develops a bulk warehouse on its newest site, the building will be Duke Realty’s fifth building in the Lehigh Valley area.
Duke’s Minneapolis-St. Paul office executed a long-term lease with MyPillow Inc., a manufacturer, distributor and seller of pillows and bedding products, for 172,836 square feet of Gateway South 2101, a new 374,700-square-foot warehouse it is developing in Shakopee.
Brian Netz with Colliers represented MyPillow in the transaction, while listing agent Kris Smeltzer with Cushman & Wakefield/Northmarq and Josh Budish of Duke Realty represented Duke.
