Tuesday, August 21, 2012

Ping Pong Ball Properties

KBS REIT I sold a portfolio of properties it foreclosed upon back to the company that originally owned the portfolio, according to the linked Bloomberg article.  I have not seen a filing from KBS REIT I on the transaction.  The 115-property transaction is for $470 million in cash: 
Gramercy, in a joint venture with Garrison Investment Group, will acquire the properties for $470 million in cash and 6 million of its shares, valued at $15 million, the New York- based REIT said today in a statement. Gramercy and Garrison each hold a 50 percent interest in the venture.

The portfolio comprises 5.6 million square feet (520,000 square meters) of office space, 81 percent of which is leased to to Bank of America Corp. through June 2023. The buildings were previously part of Gramercy’s realty division and were transferred to KBS in September as part of a deal to settle $549.7 million in mortgage debt.
The 115-property portfolio represents only a portion of the properties that were acquired through the settlement of KBS REIT I's mezzanine loan investment.  The following is language from KBS REIT I's 10-Q, which was released last week, describing the entire Gramercy portfolio and settlement:
On September 1, 2011, the Company, through indirect wholly owned subsidiaries (collectively, “KBS”), entered into a Collateral Transfer and Settlement Agreement (the “Settlement Agreement”) with, among other parties, GKK Stars Acquisition LLC (“GKK Stars”), the wholly owned subsidiary of Gramercy Capital Corp. (“Gramercy”) that indirectly owned the Gramercy real estate portfolio, to effect the orderly transfer of certain assets and liabilities of the Gramercy real estate portfolio to KBS in satisfaction of certain debt obligations under a mezzanine loan owed by wholly owned subsidiaries of Gramercy to KBS (the “GKK Mezzanine Loan”) . The Settlement Agreement resulted in the transfer of the equity interests in certain subsidiaries of Gramercy (the “Equity Interests”) that indirectly owned or, with respect to a limited number of properties, held a leasehold interest in, 867 properties (the “GKK Properties”), including 576 bank branch properties and 291 office buildings, operations centers and other properties. As of December 15, 2011, GKK Stars had transferred all of the Equity Interests to the Company, giving the Company title to or, with respect to a limited number of GKK Properties, a leasehold interest in, 867 GKK Properties as of that date.

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