NEW YORK–(COMMERCIAL THREAD) –Columbia Property Trust, Inc. (NYSE: CXP) today announced the closing of its previously announced acquisition of Normandy Real Estate Management, LLC, a developer, operator and investment manager of office and mixed-use assets in New York, Boston and Washington , DC Columbia acquired the Normandy operating platform and real estate interests for total cash and equity consideration of approximately $ 100 million, excluding transaction and closing costs. This consideration consisted of $ 13.5 million in cash and approximately $ 86.5 million in convertible preferred shares, issued at a price of $ 26.50 per share.
“This acquisition supports our strategy to drive the financial performance of investors by strengthening our capabilities in key markets, while adding a full development arm and an expanded pipeline,” said Nelson Mills, CEO of Columbia. “Our successful leasing and repositioning efforts have produced a well-leased portfolio of exceptional assets in New York, San Francisco, Washington, DC and Boston. Adding the talent, connections and market knowledge of this highly skilled team will provide us with additional opportunities to leverage our long-term history of creating value for our shareholders.
Planned investment in terminal warehouse
As part of the Normandy acquisition, Columbia has reached an agreement in principle to initiate a $ 53 million equity investment in the Terminal warehouse joint venture. Upon completion of this investment, which is the subject of ongoing negotiations and is expected to be finalized within the next 30 days, Columbia would become co-general partner alongside L&L Holding Company, LLC and Normandy Fund IV. The company – which also includes Allianz Real Estate; an institutional investor advised by JP Morgan Asset Management; two pension funds managed by LaSalle Investment Management; and a sovereign wealth fund managed by Stepstone – intends to transform the 125-year-old industrial warehouse, located on Eleventh Avenue in New York’s West Chelsea neighborhood, into a class-leading office and retail destination Has 1.2 million square feet.
Normandy Management Trades Transition
With this transaction, Columbia acquired the Normandy property management and investment businesses and their associated commission streams, as well as 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.
Collectively, these funds represent approximately 7 million square feet of commercial real estate under management in the Northeastern United States, including several major Manhattan projects. These include the Terminal Warehouse project and 888 Broadway in the Flatiron District, as well as the previously announced joint venture partnerships that Columbia has formed with Normandy at 799 Broadway near Union Square Park and the redevelopment of 101 Franklin (formerly known as the name of 250 Church Street) in TriBeCa.
As previously noted, Columbia expects the net fee streams from these property management and investment firms to be modestly accretive to its 2020 net income and normalized operating funds.
Upon closing of the Normandy transaction, Jeff Gronning, who founded Normandy with fellow partners Finn Wentworth and David Welsh, has been appointed Executive Vice President and Chief Investment Officer of Columbia. In addition, several other former Normandy partners have been appointed to leadership positions with Columbia. Gavin Evans has been appointed Executive Vice President, Acquisitions, and Paul Teti will serve as Senior Vice President, Leasing and Asset Management. Other senior Normandy employee appointments include Steve Trapp, Senior Vice President, Construction and Development; and Steve Smith, Senior Vice-President, Property Management.
Columbia also expects its board of directors to elect Wentworth to the board as a non-executive director at the next board meeting in February.
Issuance of share awards
In connection with the completion of its acquisition of Normandy (the “Transaction”), Columbia issued, as part of the consideration of $ 100 million, a total of 486,792 Series A Convertible Perpetual Preferred Units (“Units”). Privileged POs ”) of Columbia Property Trust Operating Partnership, LP (“ Columbia OP ”) to eight former employees of Normandy. The Preferred PO Units were issued as a material inducement to employment within the company under the Employment Inducement Exemption under NYSE Rule 303A.08.
The preferred shares of POs are acquired over four years, 25% being acquired on the second anniversary of the closing date of the transaction, 60% are acquired on the third anniversary of the closing date and the remaining 15% are acquired on the fourth. anniversary of the closing. date, provided in each case that the holder is employed by the company or Columbia OP on each applicable vesting date. Preferred OP units have a liquidation preference of $ 26.50 per share, rank higher than other non-designated Columbia OP partnership units (referred to as “common OP units”), and are generally not redeemable by Columbia OP, under with certain exceptions for federal income. for tax purposes.
At any time after the issuance of the Preferred OP Units (the “Initial Issue Date”), holders of Preferred OP Units may convert all or part of such Units into Ordinary OP Units. In addition, at any time after the second anniversary of the initial issue date, each preferred OP unit will automatically convert into an ordinary OP unit on the trading day immediately following the first of the following two occurrences: (i) the time at which the closing price of Columbia’s common stock on the NYSE has been equal to or greater than $ 26.50 for three consecutive trading days and (ii) when the volume-weighted average price of a stock of the stock Columbia common stock has been equal to or greater than $ 26.50 per share during any ten consecutive trading day period. Preferred OP Shares are converted to Ordinary OP Shares on a one-for-one basis, subject to adjustments related to the exchange of Ordinary OP Shares for Columbia Common Shares in accordance with the Amended and Restated Partnership Agreement of the Columbia OP.
Morgan Stanley acted as exclusive financial advisor to Columbia; Kelley Drye & Warren and King & Spalding acted as legal advisers to Columbia. Moelis & Company acted as exclusive financial advisor and Goodwin Procter as Normandy legal advisor.
About Columbia Property Trust
Columbia Property Trust (NYSE: CXP) creates value by owning, operating and developing Class A office buildings in high-barrier US office markets, primarily New York, San Francisco, Washington DC and Boston. The Columbia team has extensive experience in transactions, asset management and repositioning, leasing, development and property management. It uses these skills to increase the value of its high-quality, well-leased portfolio of 17 properties that contain approximately seven million rentable square feet, as well as two properties under development, and also generates revenue of approximately 8 million square feet. under management for private investors and third parties. Columbia has investment grade ratings from Moody’s and S&P Global Ratings. For more information, please visit www.columbia.reit.
Certain statements contained in this press release other than historical facts may be considered as forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend of all such forward-looking statements be covered by the applicable safe harbor provisions for forward-looking statements contained in such laws. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “may”, “will”, “expect”, “intend”, “anticipate”, “estimate”, ” believe, “” continue, “” or other similar words. Such statements include, in particular, statements about the expected benefits of certain transactions for shareholders and investors, the results of the company’s investments and the ability of the company and its management team to achieve the objectives of the company, and are subject to certain risks and uncertainties, including known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, these statements are not intended to be a guarantee of our performance in future periods. Readers are cautioned not to place undue reliance on these prospect statements. ives, which speak only as of the date of this press release.
Such forward-looking statements are based on a number of assumptions involving judgments concerning, among other things, future economic, competitive and market conditions, all of which are difficult or impossible to predict with precision. To the extent that our assumptions differ from actual conditions, our ability to accurately anticipate the results expressed in these forward-looking statements, including our ability to generate positive cash flows from operations, to make distributions to shareholders and to maintaining the value of our real estate, can be significantly hampered. See Section 1A in Columbia Property Trust’s Annual Report on Form 10-K for the year ended December 31, 2018, and subsequent quarterly reports on Form 10-Q, for a discussion of some of the risks and uncertainties which could cause actual results to differ. substantially from those presented in our forward-looking statements. The risk factors described in our annual report and quarterly reports are not the only ones we face, but represent the risks and uncertainties that we believe are important to us. Additional risks and uncertainties that are not currently known to us or that we currently believe are unimportant may also adversely affect our business. We make no representations or warranties (express or implied) as to the accuracy of any forward-looking statements contained in this press release, and we assume no obligation to publicly update or revise any forward-looking statements, whether at following new information, future or other events, other than those required by law.