10/03/2012

Fortress Strikes Deal for BofA Campus in NJ

Fortress Investment has tentatively agreed to buy a sprawling New Jersey office campus from Bank of America, which will fully lease it back.

The New York fund shop is believed to be paying between $375 million and $400 million for the 1.8 million-square-foot complex, in Hopewell Township. Cushman & Wakefield is the broker, with input from BofA’s in-house brokerage arm.

The 12-building campus, which was built in 2001, was marketed to foreign players, large REITs and institutional investors. One of the finalists was a partnership between syndicator David Werner and Joseph Friedland, head of JFR Global Investors of New York.

BofA’s Merrill Lynch division is expected to lease the campus for at least 10 years at a triple-net rent of about $20/sf, with annual rent bumps. But Merrill would have the option to vacate 20% of the space after three years and another 20% after eight years, creating leasing risk.

“Who’s going to fill that space?” asked one market pro, noting the relatively remote location of the property — about 8 miles north of Trenton and 65 miles southwest of Manhattan.

The perceived risk depressed bids, keeping BofA from achieving its goal of $400 million, or $222/sf. Fortress’ initial annual yield is expected to be above 9%. It’s unclear which Fortress vehicle is making the acquisition.

The purchase would be just the second single-asset acquisition of more than $100 million by Fortress since Real Estate Alert’s Deal Database began tracking deals in 2001. In 2010, Fortress acquired an 80% stake in the massive Villas Parkmerced multi-family complex in San Francisco for $588 million.

BofA has been actively selling its real estate over the past year. It sold four office properties in Boston, Charlotte and New York in the past nine months for a combined $1.3 billion. It has two other properties listed in Chicago and Charlotte that could bring in another $440 million.

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