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Following KKR Infusion, Drawbridge to Seek Opportunities in Seattle

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By Jon Peterson

San Francisco-based Drawbridge Realty is now interested in buying properties in Seattle, following last week’s announcement of recapitalization by New York City-based KKR and Cleveland-based The Townsend Group. Seattle would represent a new entry for the company as its current portfolio does not include any assets in that market.

A company representative of KKR confirmed as much in an e-mail message stating, “Drawbridge actively looks at acquisition opportunities in Seattle.”

“We are now looking for our first investment in the greater Seattle metro area. We think that the region has some very strong market demographics that make it a very strong real estate market for our strategy,” says Mark Whiting, co-founder and chief executive officer of Drawbridge Realty.

“Drawbridge actively looks at acquisition opportunities in Seattle.”

The recapitalization means that New York City-based Almanac Realty Investors is no longer a financial backer of Drawbridge. Almanac had made a $125 million investment in Drawbridge in March of 2012. This investment was made on behalf of the Almanac Realty Securities Fund VI commingled fund.

The investment from Almanac allowed Drawbridge to grow from a $200 million company to a $600 million company. “I would think that with the new capital from our new partners I would be surprised if we don’t grow the company to a $1 billion firm by the end of 2015 and make it an even larger company in the future,” said Whiting.

Drawbridge hired Eastdil Secured out of its New York City office to assist the company in putting together a recapitalization.

KKR stated in an e-mail that it would not disclose the amount of capital that was investing as part of the recapitalization. The capital provided by KKR and Townsend will be used by Drawbridge to recapitalize its existing portfolio and as growth capital for the company going forward.

Drawbridge as a company invests in single-tenant properties that are leased to strong corporate tenants. It can buy assets where the lease is in place or properties that are ready for new development, re-development or conversions to a higher and better uses.

Drawbridge now has a real estate portfolio valued at around $800 million. The amount of leverage in the portfolio is currently somewhere in the range of 50 percent to 60 percent. The existing portfolio includes assets in the San Francisco Bay Area, San Diego, Salt Lake City, Austin and the Raleigh-Durham Research Triangle Park.

Among its most recent deal was the $37.5 million acquisition of the 160,000 square foot property located at 5300-5350 Hellyer Avenue in San Jose. The property is 100 percent leased on a triple-net basis to Cobham Electronic Systems through 2022.

KKR will soon to selling a couple of assets that the company owns. “We are now in the process of selling two assets in Northern California. The first of these is a property in Mountain View. It should close in a couple of weeks. The other is a property in Palo Alto,” said Whiting. He declined to give any further details on these assets until the sales are completed.

KKR made its investment in Drawbridge as a balance sheet investment.

The Townsend Group acts as both a real estate investment consultant and places capital into real estate for major institutional investors on a global basis. This includes pension fund and sovereign wealth funds.