Duke Realty Sells Medical Office Portfolio for $2.8 Billion

Confirming initial speculation, Indianapolis, Indiana-based Duke Realty (NYSE: DRE) has indeed decided to exit the medical office space by selling its entire medical office building portfolio.

Scottsdale, Arizona-based Healthcare Trust of America, Inc. (NYSE: HTA) has agreed to purchase Duke Realty’s medical office building portfolio and medical development platform for $2.75 billion in cash.

The transaction is expected to close in multiple tranches in the second and third quarter of 2017, HTA noted in a press release.

The portfolio includes 78 properties which, together, comprise 6.1 million square feet of gross leasable area that is presently 94% leased. The portfolio also includes two development land parcels totaling about 17 acres, as well as Duke’s proportionate interest in two unconsolidated joint venture entities.

Thirty-one assets, with a purchase price of about $1.3 billion, are subject to rights of first refusals or offer which could shrink the size of the acquisition or postpone the timing of closing, if exercised, HTA noted in a press release.

Additionally, as part of the deal, Duke is mandating that HTA accept seller financing of $330 million, in the form of a senior secured first mortgage loan, which will bear interest at 4% per year. This note is not prepayable, and will require three yearly principal payments of $110 million starting in 2018.

Written by Mary Kate Nelson