City Office REIT Announces the Acquisition of $101 Million of Phoenix Office Properties and Update on Sale of Washington Group Plaza Property
VANCOUVER, Dec. 20, 2016 /PRNewswire/ -- City Office REIT, Inc. (NYSE: CIO) ("City Office" or the "Company") announced the closing of two acquisitions in Phoenix, Arizona for an aggregate purchase price of approximately $101 million. The Company also announced that, in relation to the previously announced potential sale of the Washington Group Plaza property in Boise, Idaho, St. Luke's Health System Ltd. ("St. Luke's") waived certain conditions for closing and made a $5 million non-refundable deposit.
On December 15, 2016, City Office closed the acquisition of SanTan Corporate Center ("SanTan") in Phoenix, Arizona for a purchase price of $58.5 million, exclusive of closing costs. The acquisition is anticipated to generate an initial full-year net operating income yield of approximately 7.7% based on the purchase price and the estimated cost of planned capital improvements. SanTan is a 266,531 square foot, Class A office complex located in Phoenix's technology-driven Chandler submarket. The property features a highly visible location, excellent access to the surrounding amenity base, high-end tenant finishes and an onsite café. SanTan is 100% leased, with 55% of the property's net rentable area leased to investment grade tenants, including Toyota Motor Credit Corporation.
On November 30, 2016, City Office closed the previously announced acquisition of 5090 N 40th St ("5090") in Phoenix, Arizona for a purchase price of $42.6 million, exclusive of closing costs. The acquisition is anticipated to generate an initial full-year net operating income yield of approximately 7.1% based on the purchase price and the estimated cost of planned capital improvements. 5090 is a 175,835 square foot, Class A office property strategically located within the Camelback Corridor, one of the leading submarkets in metropolitan Phoenix. The property has undergone extensive renovations and has been institutionally maintained. The building is well leased to a strong, diversified roster of nationally recognizable tenants.
"The strong attributes and attractive acquisition metrics for both of these transactions represent an excellent entry point into the Phoenix market for us," said James Farrar, Chief Executive Officer of City Office. "We believe that geographic diversification within our high growth markets strengthens our portfolio. With the closings of SanTan and 5090, we have now acquired more assets in 2016 than in any other year since our IPO, representing our commitment to scaling our portfolio with high-quality properties."
On December 16, 2016, in relation to the potential sale of Washington Group Plaza, St. Luke's completed its due diligence review, waived certain conditions precedent for closing and made a $5 million non-refundable deposit. The sale price of $86.5 million represents an expected capitalization rate of approximately 5.8% based on 2017 budgeted net operating income. Closing is scheduled to occur in April 2018 in conjunction with the maturity of the property's secured mortgage. However, both City Office and St. Luke's have the right to accelerate closing by providing at least 120 days' advance notice, with the party triggering the acceleration responsible for paying the defeasance costs associated with the existing mortgage loan.
"The agreement to sell the Washington Group Plaza property represents our ability to create value for our shareholders at the property level," said James Farrar. "The four office buildings that comprise Washington Group Plaza were contributed to City Office as part of our IPO in April 2014. Since that time, we have completed numerous leasing transactions and implemented substantial operational improvements and cost savings. These efforts enhanced the property, which laid the foundation for a mutually beneficial transaction with St. Luke's."
About City Office REIT, Inc.
City Office REIT is an internally-managed real estate company focused on acquiring, owning and operating high-quality office properties located in leading markets in the Southern and Western United States. City Office currently owns or has a controlling interest in 4.4 million square feet of office properties. Additional information about City Office is available on the Company's website at www.cityofficereit.com. The Company has elected to be taxed as a real estate investment trust for U.S. federal income tax purposes.
Forward-looking Statements
This press release contains "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements that are not statements of historical facts are, or may be deemed to be, forward-looking statements. These factors include, but are not limited to, the Company's ability to source, acquire and close on properties on the terms it expects, or at all; the Company's expectations and forecasts of its cash flows and future leasing activity at its current and future properties, and the Company's ability to accurately model the income yield, capitalization rate, and other financial metrics used to evaluate its properties. These and other material risks are described in the Company's Annual Report on Form 10-K for the year ended December 31, 2015 and any other documents filed by the Company from time to time, which are available from the Company and from the SEC, and you should read and understand these risks when evaluating any forward-looking statement. The Company does not have any obligation to publicly update any forward-looking statements to reflect subsequent events or circumstances.
Contact
City Office REIT, Inc.
Anthony Maretic, CFO
+1-604-806-3366
[email protected]
SOURCE City Office REIT, Inc.
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