Blackstone Buys $1B Duke Realty Portfolio

Duke Realty Corp. entered into a definitive agreement to sell a 10.1-million-sq.-ft. portfolio of suburban office properties located in seven markets throughout the Midwest and Southern regions to an affiliate of Blackstone Real Estate Partners VII. The 82-building portfolio includes substantially all of Duke’s wholly-owned suburban office properties in Atlanta, Chicago, Columbus, Dallas, Minneapolis, Orlando and Tampa and was traded for a total purchase price of $1.08 billion.

"The portfolio sale is simply a continuation of our strategic plan to reduce our investment in suburban office properties, primarily in Midwest markets. The transaction generates over $1 billion of capital for the acquisition and development of industrial and medical office assets and to further de-lever the company's balance sheet consistent with our strategic capital plans," Duke Realty Chairman & CEO Denny Oklak said in a statement.

According to Duke Reality, the portfolio is 84.6 percent leased and the buildings have an average age of 15 years. Assumed debt in the transaction is expected to be $30 million. The sale of the portfolio is expected to generate a net book gain. Blackstone will assume leasing and property management responsibilities for the portfolio.

The portfolio repositioning is part of Duke Realty's long-term strategy to achieve an investment allocation of 60% industrial, 25% office and 15% medical office, comprised of high-quality assets within each product sector. Geographically, the company is moving to further strengthen its distribution market presence, own class-A office buildings in high-growth, development constrained markets and further solidify relationships with leading health care systems for strong growth of its premier medical office business.

Closing of the transaction is expected to occur on or about December 1, 2011. It is not anticipated that this transaction will have a material impact on the company's financial results for 2011.

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