University Circle is a 451,000-square-foot office complex in Palo Alto, CA valued at $540 million. Credit: Jeff Peters
NEW YORK CITY—Allianz Real Estate and Columbia Property Trust Inc. reports they have completed the formation of a $1.26-billion joint venture that at its outset includes two major office assets in California and one office property on Fifth Avenue in Manhattan.
Columbia Property Trust Inc., headquartered in Atlanta, and Allianz Real Estate, part of the Allianz Group, each contributed assets to the joint venture. Columbia contributed two of its properties in the San Francisco Bay area—University Circle, a 451,000-square-foot office complex in Palo Alto, CA valued at $540 million, and 333 Market St., a 657,000-square-foot office tower in the Financial District of San Francisco fully leased to Wells Fargo that is valued at $500 million. Columbia acquired University Center in 2005 and 333 Market St. in 2012. Columbia Property Trust was advised by Holliday Fenoglio Fowler, L.P. and J.P. Morgan Securities LLC in the transaction.
Allianz contributed the 353,000-square-foot 114 Fifth Ave. office building in Manhattan, valued at $220 million that Allianz has owned since 2015 along with its 1% partner, L&L Holding Co. The 19-story tower recently underwent a $45-million capital investment in infrastructure and contemporary renovations. Allianz was advised by Cushman & Wakefield of New York on the 114 Fifth Ave. transaction.
The joint venture partners, who say the partnership will be making further acquisitions in core CBDs in gateway markets in the United States, note the new joint venture accomplishes key goals for each. For Columbia, the partnership increases its scale in core markets, while the joint venture accomplishes Allianz’s goal of acquiring West Coast assets.
Allianz Real Estate of America has a portfolio of more than $14 billion with its office, multi-family, retail, and industrial holdings located in more than 30 metro markets. Columbia Property Trust owns and manages a Class-A office buildings portfolio that includes 16 operational properties containing 8 million square feet, concentrated in New York, San Francisco and Washington, D.C.
“Our joint venture with Allianz is the right vehicle for increasing scale within our core markets,” says Nelson Mills, president and chief executive officer of Columbia Property Trust. “This partnership allows us to increase market presence without issuing stock or raising leverage, and we have found an ideal partner in Allianz, which shares our investment outlook and disciplined, long-term approach to investing. Additionally, with these transactions, we realize a portion of the substantial value we have created within our portfolio.”
Christoph Donner, CEO of Allianz Real Estate of America, says of the joint venture formation, “Our investment in this joint venture achieved our immediate goal of acquiring premier office assets in core locations on the West Coast. Over the long-term, the opportunity to further diversify and expand our national geographic exposure in the U.S. office sector, and to form a strategic partnership with Columbia Property Trust is a win-win situation. It is rare to find an investment partner of their caliber with objectives so closely aligned with ours.”
The transactions, which closed on Thursday, change the ownership positions in the two California properties and the Manhattan office building. Allianz now owns a 22.5% interest in University Circle and 333 Market St., while Columbia owns 77.5% and will continue to oversee property management and leasing of those two California properties, as well as management of day-to-day operations of the joint venture. At 114 Fifth Ave., Columbia and Allianz each own 49.5%, while L&L retains its general partnership stake and will continue as the property management and leasing agent for the Midtown South building.
Within the next 12 months, Allianz will increase its ownership interest in both University Circle and 333 Market St. to 45%, thereby adjusting Columbia’s ownership percentage in those two properties to 55% and self-funding the venture for Columbia.