Washington Real Estate Investment Trust (WRIT) has entered into four separate contracts with a single buyer to sell a 100 per cent interest in its medical office portfolio and two office assets comprising a total of 1.5 million square feet.
The combined sale price is USD500,750,000, or USD329.00 per square foot.
The portfolio consists of 17 medical office assets and two suburban office buildings, 6565 Arlington Boulevard and Woodholme Center, as well as a land parcel located in Alexandria, Virginia which is being used as off-site/overflow parking for one of the medical office buildings in the portfolio. The sale will be structured as four independent transactions, each of which will close pursuant to a separate purchase and sale agreement. The projected closing date for the first two transactions is 12 November 2013 and the outside closing date for the second two transactions is 31 January 2014.
The medical office portfolio represents the largest portfolio of institutional quality medical office assets in the Washington, DC region, with all of the assets located near major medical centres such as Inova Fairfax Hospital, Shady Grove Adventist Hospital and George Washington Hospital or near affluent communities and urban centres.
In January, WRIT announced the proposed sale of the medical office portfolio as a strategic opportunity to streamline the company's business operations. With the disposition of the medical office portfolio, WRIT has simplified its business operations to focus exclusively on its core office, multifamily and retail sectors.
"The Cassidy Turley and JP Morgan team did a remarkable job marketing and identifying qualified buyers on our behalf," says Bill Camp, executive vice president and chief financial officer of WRIT. "By successfully completing this transaction, we are able to obtain our lowest cost of equity capital, a critical step in transforming our portfolio to one focused entirely on properties where people work, live and shop."
WRIT plans to use proceeds from the medical office sale to reinvest into high-quality downtown or metro-centric office buildings and well-located retail and multifamily assets. In addition to acquisition opportunities, WRIT has the ability to use proceeds to pay down existing outstanding debt. Lastly, if acquisition opportunities that satisfy WRIT's investment criteria are not available, WRIT may consider distributing a portion of the proceeds as capital gains to its shareholders. A small portion of the proceeds will also be used to reimburse WRIT for costs associated with defeasance and repaying USD23m of existing loans on the medical office portfolio.
"Over the past decade, we have methodically grown our medical office portfolio into becoming one of the largest landlords of institutional quality medical office properties in the Washington, DC metro area," says George F "Skip" McKenzie, president and chief executive officer of WRIT. "With the completion of the medical office portfolio sale, we will be successfully exiting this business line, which has been extremely profitable for us over the past decade."