J.P. Morgan Unit to Take Columbia Equity Private

By Dana Hedgpeth
Washington Post Staff Writer
Tuesday, November 7, 2006

Columbia Equity Trust Inc., owner of 21 local office buildings, agreed yesterday to be sold to a private real estate investment fund run by J.P. Morgan Chase & Co.

J.P. Morgan Asset Management's Special Situation Property Fund is to pay $289 million, or $19 per share in cash, for Columbia Equity and assume $213 million in debt. Columbia Equity owns and operates commercial office properties totaling 3 million square feet in the Washington region.

Columbia is made up of properties previously owned or controlled by the Carr family. The trust went public in June 2005 at $15 a share. A much larger, national office owner controlled by the Carrs, CarrAmerica Realty, was sold this year to a private real estate fund. The deals represent the strong interest in mature office real estate, especially in the Washington area, by private equity funds.

"With their existing portfolio we knew they would be an attractive investment," said Nathaniel Daly, vice president at J.P. Morgan Asset Management. "They're in downtown, Northern Virginia and Maryland, and they have some long-term tenants, redevelopment plays and development potential. It's an attractive fit on all fronts given the focus of our fund."

Another factor, said John W. Guinee, managing director of research at Stifel Nicolaus & Co., was the so-so performance of Columbia as a public company. "They were having difficulty hitting their quarterly operating numbers and with the high cost of being public," he said. "They have very high general and administrative costs of being a public company and in complying with SEC requirements such that being private and being entirely funded by J.P. Morgan was very appealing."

The deal with Columbia Equity, expected to close in the first quarter of 2007, needs the approval of Columbia shareholders.

Daly said "nothing is going to change in the way the company operates."

Oliver T. Carr III, chairman, president and chief executive of Columbia Equity, and John A. Schissel, executive vice president and chief financial officer, are to stay on as executives.

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