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Black Creek Diversified Property Fund Sells Office Building in San Francisco for $191.5 Million

May 15, 2019

Black Creek Diversified Property Fund Sells Office Building in San Francisco for $191.5 Million

May 13, 2019 | James Sprow | Blue Vault

On May 6, 2019, Black Creek Diversified Property Fund Inc. completed the sale of 655 Montgomery, an office property located in San Francisco, California, comprising approximately 263,000 square feet to BCAL 655 Montgomery Property LLC, an unrelated third party, for a gross sales price of approximately $191.5 million, less closing costs and customary closing provisions. As of December 31, 2018, the accounting basis (net of accumulated depreciation and amortization) for 655 Montgomery was approximately $105.4 million. The resulting impact of this disposition, applied to the REIT’s real estate portfolio as of December 31, 2018, contributed to an increase in the real estate portfolio’s leased percentage from 90.6% to 90.7%. (As of December 31, 2018, the property was 89.1% occupied.  A major tenant was WeWork Companies.) The REIT expects to redeploy the net proceeds from this sale into new investments, including investments in industrial and/or multifamily sectors in particular.

The REIT acquired the 655 Montgomery property in November 2013 for $109.7 million.  The gross selling price represents an annualized rate of increase of approximately 10.7%, and an estimated capital gain of approximately $83 million, before expenses. It was encumbered by a mortgage note and a mezzanine loan secured by a pledge of ownership interests in DPF 655 Montgomery LP, which the REIT prepaid at par upon the closing of the transaction. As of December 31, 2018, the mortgage note and mezzanine loan had an aggregate outstanding principal balance of approximately $98.6 million with a weighted-average variable interest rate of 5.25% and both would have matured in September 2020.

Related: Adding Value with Debt

With the sale of the San Francisco office property, the REIT’s portfolio consists of 46 properties, 13 office, 28 retail and five industrial, located in 17 unique markets, comprising 7.4 million square feet, with an aggregate fair market value of over $1.9 billion, as of December 31, 2018. 

For the year ended December 31, 2018, distributions to common shareholders totaled $47.725 million, including $28.714 million of common stock distributions paid in cash and $19.051 million reinvested in shares. Distributions during the year ended December 31, 2018, were fully funded from operations.

As of March 1, 2019, the REIT’s Class T and Class S shares had a net asset value of $7.67 per share and its Class D, I and E shares had a NAV of $7.41 per share. The REIT reported sales in 2018 of $160.1 million, including DRIP, and $70.2 million YTD through April 2019.

Sources:  SEC, Blue Vault

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Matthew C. Strife
Blue Vault Services
April 11, 2016

Blue Vault's services are without question great resources for the review of the nontraded products offered.