NEW YORK – Columbia Property Trust, Inc. announced the signing of a definitive agreement to acquire Normandy Real Estate Management, LLC, a leading developer, operator and investment manager of office and mixed-use assets in New York, Boston and Washington, DC
Columbia to acquire Normandy operating platform and its general partner interests in three actively managed funds in cash and stock transaction totaling approximately $ 100 million, excluding fees transaction and closing. The transaction is expected to be finalized by the end of 2019 pending the fulfillment of the usual closing conditions.
“The expansion of our platform – both our capabilities and our presence in our key markets – strongly supports Columbia’s long-term growth objectives. The combination of the Columbia and Normandy teams enhances our mutual talents, resources and relationships, and strengthens our leadership position in our target markets, ”said Nelson Mills, President and CEO of Columbia.
“Beyond Normandy’s proven supply, development and management capabilities, we have had the opportunity to directly experience their positive culture through our joint projects in Manhattan,” Mills continued. “By joining forces, we will be able to provide fully integrated construction, development, rental and property management services, as well as a complementary fund management platform to increase our core portfolio operations. All of this should greatly benefit our shareholders and our respective tenants, employees and partners. “
Over the past two decades, Normandy has built a highly respected track record in the acquisition, development, redevelopment, repositioning and management of real estate assets as exceptional investments with attractive returns. Normandy has acquired or developed over 30 million square feet of office space in New York, New Jersey, Boston and Washington, DC, including dozens of major corporate headquarters for leading companies. The company has also completed numerous value-added repositioning projects, and ongoing projects in Manhattan include the Terminal Warehouse, an iconic 1.2 million square foot brick and beam property in historic West Chelsea, and 888 Broadway, a 237,000 square foot major architectural redevelopment in the Flatiron District. In addition, Columbia and Normandy have already announced joint venture partnerships on 799 Broadway, a 182,000 square foot development near Union Square Park and the redevelopment of 250 Church Street in TriBeCa.
These development and repositioning projects were financed by a series of discretionary real estate funds and joint ventures managed by Normandy and supported by a number of respected institutional investors. Normandy currently manages approximately 14 million square feet of assets in the Northeastern United States on behalf of its various fund investors and joint venture partners.
Founded in 2002, Normandy is managed by partners Finn Wentworth, David Welsh and Jeff Gronning. Wentworth is expected to join Columbia’s board of directors. Welsh will chair the investment committee of Norman funds III and IV, in which Columbia will acquire general partner interests. Gronning is expected to become Chief Investment Officer for Columbia, while fellow Norman partners Gavin Evans and Paul Teti will also join Columbia’s management team.
Wentworth commented, on behalf of the founders of Normandy, “The strategic combination of Columbia and Normandy will form a stronger company with an exceptional gateway market portfolio, a world-class team and a robust pipeline. We have immense respect for Columbia’s strategy and leadership team, and after launching two projects with them last year, we’ve seen how their culture and business model aligns with ours. We believe that the combination of our development expertise and our close relationships in New York, Boston and DC with the Columbia platform will create a formidable force in these markets. The combined company will be positioned to expand our many successes and deliver superior results for all stakeholders. “
Main strategic advantages of the transaction
- Extended platform: The acquisition further strengthens Columbia’s procurement, construction and other key capabilities and adds a full development arm, while also creating a complementary fund management program to generate additional revenue.
- Improved execution: By expanding Columbia’s talent base, skills, relationships, resources and key market presence, the Normandy acquisition strengthens Columbia as a vertically integrated company with greater ability to drive flow growth. of cash in its continued efforts to generate peak returns.
- Better access to capital: Normandy’s deep relationship between funds and joint ventures will improve Columbia’s current access to sources of capital. In turn, Normandy’s existing partners and investors will benefit from Columbia’s high-quality balance sheet, capable of supporting further growth.
- Augmented growth strategy: By acquiring a proven development platform and an expanded investment pipeline of value-added projects, Columbia will have additional opportunities to build on its long-term track record while enhancing the growth profile of its core portfolio.
- Accretive transaction: Columbia expects expense streams from Normandy’s management activities to be accretive to 2020 Normalized Operating Funds and expects to realize longer-term benefits through operational synergies and on a larger scale.
Columbia will acquire the Normandy operating platform and real estate interests for a total consideration of approximately $ 100 million, excluding transaction and closing costs. This consideration will consist of $ 13.5 million in cash and approximately $ 86.5 million in convertible preferred units, issued at an exercise price of $ 26.50 per share.
In addition to Normandy’s property management and investment activities and their related commission streams, Columbia will acquire general partnership interests and certain limited partnership interests totaling approximately 2% in each of Normandy Real Estate Fund. III, LP; Normandy IV Real Estate Fund, LP; and Normandy Opportunity Zone Fund, LP. The Normandy Real Estate Fund, LP and Normandy Real Estate Fund II, LP, as well as several mixed-use peri-urban development projects are not included in the transaction.
The transaction, which has been approved by Columbia’s board of directors and the Normandy owner partners, is expected to be finalized before the end of the year, subject to various consents from partners and lenders, and other conditions of usual closing. The transaction is not conditional on receipt of financing.
Morgan Stanley acts as exclusive financial advisor to Columbia; Kelley Drye & Warren and King & Spalding are acting as Columbia legal advisers. Moelis & Company acts as exclusive financial adviser and Goodwin Procter as Normandy legal adviser.
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