UPGRADED: Healthcare Trust of America to Obtain Duke Real estate'' s Medical Workplace Portfolio for $2.75 Billion

Duke Realty's Baylor McKinney 2 MOB in McKinney, TX, is among those being sold to Healthcare Trust of America.
Duke Realty’s Baylor McKinney 2 MOB in McKinney, TX, is amongst those being offered to Healthcare Trust of America. Healthcare Trust of America, Inc.(NYSE: HTA)is buying all the medical office buildings owned by Duke Realty Corp. (NYSE: DRE) and its medical development pipeline for $2.75 billion in money. The cost breaks down to approximately $450/square foot.

The deal consists of $2.35 billion for 64 stabilized, running medical workplace properties and $400 million for 14 residential or commercial properties under advancement or in the lease-up stage.

The consolidated portfolio consists of 78 properties total which contain 6.1 million square feet of gross leasable area that are 94% leased, consisting of Duke’s proportionate interest in 2 unconsolidated joint endeavor entities. The acquisition also consists of 2 advancement land parcels amounting to 17 acres.

The mix will increase HTA’s portfolio to 25 million square feet of medical office.

“This deal strengthens HTA as the dominant owner and operator of medical office buildings located in key, gateway markets in the United States,” stated Scott D. Peters, chairman and CEO of Scottsdale-based HTA.

Around 85% of the properties lie in HTA’s existing markets. HTA said the overlap must lead to “considerable operating synergy opportunities” for home management, leasing and development.

The transaction is expected to close in a number of tranches in the second and third quarter of 2017. The final size of the offer could differ as 31 of the residential or commercial properties undergo rights of first refusals or deal, which could lower the size of the acquisition or postpone the timing of the closing.

As part of the contract, Duke is requiring that HTA accept seller funding of $330 million, through a senior protected very first mortgage, which will bear interest at 4% per year. This note will require 3 yearly primary payments of $110 million beginning in 2018 and is not prepayable.

Health care Trust of America said it will fund the remainder of the purchase price through the sale of typical stock.

HTA priced the offering of 47.5 million shares at $28.50 per share. The offering was upsized from an initial offering size of 39.5 million reflecting strong investor interest. In addition, the underwriters have a 30-day choice to buy approximately an extra 7.125 million shares. HTA will get roughly $1.35 billion in gross proceeds from the offering.

[Editor’s Note: This story was upgraded Wednesday afternoon May 3rd with the news of the upsized offering and additional details on Duke Real estate below.]

Wells Fargo Securities and its subsidiary, Eastdil Protected, are serving as unique financial consultants to Health care Trust of America, and O’Melveny & & Myers LLP, San Francisco, is functioning as its legal counsel to the business in connection with the transaction.

Hogan Lovells US LLP is legal advisor to Duke Realty in the sale.

Upon statement of the MOB portfolio sale, Duke Real estate announced a series of brand-new industrial residential or commercial property financial investments.

In South Florida, Duke got 3, recently built commercial buildings amounting to 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 acquired residential or commercial 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 area office of Duke bought 72.87 acres in Bethel Area in Berks County, Pennsylvania, for future advancement. The land called Central Logistics Park, fronts I-78. When Duke Real estate develops a bulk storage facility on its most recent site, the building will be Duke Realty’s 5th building in the Lehigh Valley location.

Duke’s Minneapolis-St. Paul office executed a long-term lease with MyPillow Inc., a manufacturer, supplier and seller of pillows and bed linen items, 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 noting representative Kris Smeltzer with Cushman & & Wakefield/Northmarq and Josh Budish of Duke Real estate represented Duke.

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