Rreef Funds Closes on $700M Acquisition Loan

SAN JOSE-Rreef America REIT III Inc. has closed on a $700-million acquisition financing that took out the bridge loan it used to acquire the 119-building Peery-Arrillaga portfolio in April for $1.1 billion. The seven-year loan includes a portion with a fixed interest rate and a portion with a floating interest rate, an industry source tells GlobeSt.com. JP Morgan Chase Bank provided the bridge and permanent financing and is expected to securitize the current loan, which closed about 10 days ago.

The loan allows Rreef certain pre-payment options and the ability to release properties from the loan for re-sale while requiring certain loan parameters be maintained, such as the debt service coverage ratio, according to the source. “You could ask three different people involved and they would come up with a different number for what the ratio is,” the source says. “It was a very difficult transaction from a lender’s perspective because the vacancy in the portfolio and a significant amount of above-market rents.”

The source declined to reveal the specific interest rate and float, saying only that it was “extremely competitively priced.” Eric Tupler of CBRE Melody, who headed up the loan origination team for both deals, declined to comment on or confirm the details, citing client confidentiality. He did say that the time between the bridge and permanent financing reflected the time necessary to inspect and appraise 119 buildings.

The Silicon Valley portfolio, which is approximately 68% leased, contains a mix of 1980s and 1990s low-rise office and R&D buildings located in the cities of Mountain View (Synopsys campus), Santa Clara (Marriott Business Park), Milpitas (Milpitas Business Park and the Quantum/Maxtor campus), Sunnyvale and San Jose. The portfolio’s 132 tenants include ADAC Laboratories/Philips Medical Systems, Maxtor/Seagate Technology, Synopsis and Samsung. Locally headquartered Peery-Arrillaga developed the portfolio on 337 acres over the past 40 years.

Earlier this month another five-million-sf Bay Area portfolio changed hands when an affiliate of New York’s Blackstone Group closed on its $5.6-billion acquisition of all outstanding shares of CarrAmerica Realty Corp., a public company with a 26.4-million-sf portfolio, including about 5.1 million sf in Northern California.

In late June, TA Associates Realty acquired a 51-building Southern California industrial portfolio for $204 million, according to local sources. The Boston-based investment firm acquired 1.7 million sf in a multi-phase purchase that included well-leased buildings spread fairly evenly between Los Angeles, Orange County and San Diego.

The properties were part of 9.6-million-sf portfolio of bulk distribution, light industrial and service center building sold by a joint venture of TIAA CREF and Rreef Funds for more than $700 million. The so-called CalTIA portfolio is believed to be the largest investor portfolio sale in the US this year.

The larger piece of the portfolio–7.9 million sf in 79 buildings in Atlanta, Baltimore, Charlotte, Cincinnati, Dallas, Miami, Orlando and San Francisco–was sold to Denver-based Dividend Capital for $496.4 million. GlobeSt.com reported that portion of the deal on May 23 and it closed in early June.