Office Properties Income Trust announced that it has completed the acquisition of two Class A office properties for a total of $550.0 million, excluding closing costs.
OPI acquired the approximately 531,190 square foot Class A office property known as 1K Fulton in Chicago, IL for $355.0 million, excluding closing costs, reflecting a current GAAP cap rate of 4.7% at closing. The property is 73% leased to Google as its Midwest headquarters and 99% leased overall, with a weighted average lease term of 6.6 years. This LEED certified property underwent a full redevelopment in 2015, is located one block from the Chicago Transit Authority rail stop, and features many amenities, including 157 subterranean parking spaces, ground-floor retail, a premier steak house restaurant, two fitness centers and multiple roof decks. The property is in the Fulton submarket of Chicago which has experienced strong population growth and modern residential and mixed-use development attracting Fortune 500 companies such as Google and McDonald’s.
OPI also acquired the approximately 345,917 square foot Class A office property known as Twelve24 in Atlanta, GA for $195.0 million, excluding closing costs, reflecting a current GAAP cap rate of 6.3% at closing. The property is 96% leased to Insight Global as its corporate headquarters and 98% leased overall, with a weighted average lease term of 14.2 years. The property was constructed in 2021, includes direct access to MARTA (Atlanta’s rail system), and features many amenities, including a fitness center, outdoor patio, café, ground-floor retail and a total of 1,023 parking spaces. The property is in Atlanta’s Central Perimeter submarket which is the largest employment center in Greater Atlanta and home to Fortune 500 headquarters for Mercedes, State Farm and Nasdaq.
OPI used cash and drew approximately $350 million under its unsecured credit facility to fund these acquisitions. OPI plans to sell additional non-core properties as part of its capital recycling program to repay drawings under its credit facility used to fund these acquisitions.
Chris Bilotto, President and Chief Operating Officer of OPI made the following statement:
“These two Class A office properties squarely fit our objective of owning, operating and leasing properties that are primarily leased on a long term basis to tenants with high credit quality characteristics. Since commencing our capital recycling strategy in 2020, we have sold more than $280 million of properties and now are pleased to redeploy the proceeds into these carefully selected acquisitions of newly constructed core real estate in strong, growing markets majority leased to high credit quality tenants. By selling older properties, those with shorter lease terms or upcoming vacancies, we have eliminated anticipated leasing downtime and significant capital expenditures over the next few years. These new acquisitions enhance our portfolio metrics and are accretive to our cash flows.”
Office Properties Income Trust is a real estate investment trust, or REIT, focused on owning, operating and leasing properties primarily leased to single tenants and those with high credit quality characteristics such as government entities. OPI is managed by the operating subsidiary of The RMR Group Inc. (Nasdaq: RMR), an alternative asset management company that is headquartered in Newton, Massachusetts.