Thursday, March 24, 2011

Cole Bets On Phoenix
Cole Properties made news last year when it paid $310 million for a Seattle-area property subject to long-term lease to Microsoft.  I was told today to expect another large Cole acquisition that was big enough for inclusion in tomorrow's Wall Street Journal.   I am guessing Cole's $170 million sale-leaseback of for-profit college Apollo Group's headquarters in Phoenix is the news.  Here is an excerpt from a Wall Street Journal / Dow Jones article:
According to a securities filing, Apollo agreed to sell its headquarters to a unit of Cole Real Estate Investments, a non-traded real estate investment trust based in Phoenix. Apollo then will lease the properties back at an annual rental rate of $12 million, with 2% increases each subsequent year. Apollo expects $28 million in gains on the sale, to be realized throughout the life of the lease. The lease, with an initial term of 20 years, has four five-year renewal options. 
The cap rate is 7% based on the $170 million price tag and $12 million of rent, assuming the lease is triple net.  The acquisition of the 600,000 square foot complex is Cole's largest property in Phoenix.

The article states that Cole plans to make $3 billion worth of acquisition in 2011, up $500 from 2010.


Katie said...

What a great investment for Cole REIT. I also read that this acquisition is the largest acquisition that has happened in Phoenix. Since they acquired an office building do you know if this transaction is for their newer REIT that specializes in office and industrial real estate? I'm sure we'll see plenty more acquisitions like this if they're trying to acquire $3 billion in real estate.

Rational Realist said...

The acquisition was in Cole Credit Properties Trust III. Here is the link to the 8-k filing:

$3 billion is a lot of money to place so I agree that we'll see bigger acquisitions.

Katie said...

@ Rational Realist - Thanks for the information on the acquisition!