Kennedy Wilson, Equity Partners Complete Five-Building L.A. Office Portfolio

Kennedy Wilson, along with its equity partners, has wrapped up the acquisition of a five-property office portfolio in metropolitan Los Angeles for a total of $143.5 million.

December 21, 2011
By Barbra Murray, Contributing Editor

6400 Canoga Ave.

Kennedy Wilson, along with its equity partners, has wrapped up the acquisition of a five-property office portfolio in metropolitan Los Angeles for a total of $143.5 million. The international real estate investment and services firm just placed the last piece of the puzzle with the closing of the $19 million purchase of Warner Atrium, a 126,000-square-foot office building in Woodland Hills, Calif.

Carrying the address of 6400 Canoga Ave., Warner Atrium sits approximately 25 miles east of downtown Los Angeles in the Warner Center master-planned community. The three-story, dual-atrium building first opened its doors in 1981.

The other four properties in the portfolio include 145 Fairfax, a 56,000-square-foot structure in the Miracle Mile area of Los Angeles that Kennedy Wilson and partners purchased for $13.5 million in November. And in October, the company announced the completion of the $111 million acquisition of the first three of the five assets, including the 88,900-square-foot 9301 Wilshire in the Golden Triangle area of Beverly Hills; the 169,600-square-foot 16501 Ventura in Encino; and 9320 Telstar, a 258,600-square-foot building in El Monte.

With the closing of the five-property purchase, Kennedy Wilson, owner of a 37 percent stake in the group of assets, has added an aggregate 700,000 square feet of office space to its holdings. Kennedy Wilson Real Estate Fund IV, Fairfax Financial and The LeFrak Organization own the remaining 63 percent interest in the portfolio.

Together, the office properties feature an average occupancy level of approximately 86 percent, which leaves ample room for lease-up at higher rates down the road once the Los Angeles market’s slow crawl toward recovery evolves into a sprint. The average vacancy rate in the area sat at 19 percent in the third quarter, as per a report by commercial real estate services firm Transwestern, marking a continuation of the 18-plus percent vacancy rate that has plagued the market since the first quarter of 2010.

But Kennedy Wilson is not sitting on the sidelines awaiting the inevitable rebound. “There was upside in a number of the assets that, once we complete our planned cosmetic renovations of those assets, we believe we’ll be able to boost the occupancy in all of them,” John C. Prabhu, president of Kennedy Wilson Commercial Investment Group, told Commercial Property Executive. “We’re still developing the plan. We’re going through the design process and are getting those plans in place.”

Kennedy Wilson’s agenda includes more of the same for 2012. “We’re not really looking for any core assets, we’re looking for value-add opportunities, something where we can come in and reposition the property from either a physical or a leasing standpoint,” Prabhu said.

The company will be geographically consistent as well. “From the office standpoint, we like to look in markets where we have a presence so we’re looking in Southern California, Northern California — specifically downtown San Francisco — and the Seattle market,” Prabhu said.