The portfolio is valued at $245.4 million and is 96.4% leased. The valuation represents a cap rate of approximately 7.3%, based on net operating income through Sept. 30, 2007, and 7.9% based on preliminary NOI projections for 2008.
Under the terms of the agreement, with the exception of three buildings, DRA obtains an 80% interest in the portfolio, and Brandywine retains a 20%-share and also continues to manage and lease the properties. In the exceptions, which aggregate 202,373 sf Allentown, Brandywine sold an 89% interest and retains 11%.
The portfolio includes nine buildings in Horsham aggregating 318,137 sf, six in Fort Washington aggregating 457,913 sf and three in Bensalem with an aggregate of 167,280 sf. The 11 Allentown assets aggregate 672,897 sf. Robert Fahey in the Philadelphia office of CB Richard Ellis represented Brandywine in marketing the portfolio.
As a condition of the close, the JV secured $184 million in financing on the portfolio. It is a seven-year, non-recourse loan at 5.78% interest with an initial, 36-month interest-only period, followed by monthly principal and interest payments pursuant to a 30-year principal amortization schedule until the Jan. 1, 2015 date of maturity.
Brandywine realizes a gross gain of $235.4 million and a net gain of $230.9 million after transaction expenses. It will use the proceeds to reduce debt on its unsecured revolving credit facility. "The capital we have raised enhances our balance sheet flexibility and will ultimately get recycled into a variety of growth opportunities in our target markets, including our current and planned development projects," says Jerry Sweeney, president and CEO, in a statement.
Among locally based Brandywine's current and planned developments is Cira Centre South, an $800-million, 2.8-million-sf mixed-use complex on 14 acres in Philadelphia, owned by the University of Pennsylvania. Brandywine moved ahead on the opening, $265-million phase of the project this November. Sweeney signaled plans to enter into this and possibly additional JVs during the company's third-quarter conference call, and reiterated to GlobeSt.com, "it's certainly a very viable way for us to raise capital."
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