KBS Unit Sells $1.2B Office Portfolio

The sale of 11 Class A properties still leaves KBS Real Estate Investment Trust III Inc. with 20 assets valued at more than $3 billion.
171 17th, Atlanta. Image courtesy of KBS

KBS Real Estate Investment Trust III Inc. has sold off 11 Class A office properties valued at $1.2 billion, the fund’s parent company KBS announced. The 11 assets that were sold total 3.4 million rentable square feet of Class A office space and span the proverbial “coast to coast.” They include:

  • Tower I at Emeryville, Emeryville, Calif.
  • 222 Main, Salt Lake City
  • Village Center Station, Greenwood Village, Colo.
  • Village Center Station II, Greenwood Village, Colo.
  • 101 S. Hanley, St. Louis
  • Tower on Lake Carolyn, Irving, Texas
  • Promenade I & II at Eilan, San Antonio, Texas
  • CrossPoint at Valley Forge, Wayne, Pa. (metro Philadelphia)
  • One Washingtonian Center, Gaithersburg, Md.
  • Reston Square, Reston, Va.
  • 171 17th St., Atlanta
222 Main, Salt Lake City. Image courtesy of KBS

In connection with the transaction, KBS REIT III reportedly repaid outstanding debt secured by the properties and retained a 33 percent ownership interest in the purchaser. In addition, KBS states that it’s planning to use a “significant amount” of the proceeds to provide enhanced liquidity to KBS REIT III stockholders (whether through the share redemption program or one or more self-tender offers) and to use a portion of the net proceeds to pay a special distribution.

The buyer was not disclosed, and KBS declined to provide that and other information requested by Commercial Property Executive.

Office market successes

One of the properties still in the KBS REIT III portfolio is 500 W. Madison in Chicago, which earlier this month was rebranded as Accenture Tower, after the anchor tenant increased its space to a total of 226,486 square feet.

KBS had implemented a multimillion-dollar renovation of the Class A, LEED Gold–certified property in 2015. As a result, the 40-story, 1.5-million-square-foot property now features a two-level, 14,000-square-foot fitness center with a basketball court, group exercise classes and a new tenant lounge with air hockey, shuffleboard and wine lockers.

Nationwide, office absorption hit 10.2 million square feet in the second quarter, up from 9.3 million square feet from 12 months prior, according to a recent report from Newmark Knight Frank. Also in the second quarter, absorption was positive in 42 of the 56 markets tracked by NKF. Rents continue to rise, though the rate of growth has slowed. Asking office rents nationwide averaged $28.98 gross full service at the end of the second quarter, also according to NKF.