Kilroy Acquires Yet Another Value-Add Office Property
- Aug 13, 2012
Kilroy Realty Corporation recently expanded its Los Angeles office portfolio with the acquisition of a 22-story office building centrally located in Hollywood. The property stands at 6255 Sunset Boulevard, just off the well-known corner of Sunset and Vine, in an area that has seen its fair share of retail and residential investment during the past couple of years. Kilroy reportedly paid a fee of around $79 million for the Sunset Media Center, making the purchase part of an aggressive West Coast expansion campaign.
The 22-story, class A office tower offers 320,000 square feet of office space in the booming Hollywood submarket, allowing tenants easy access to the Metro Rail Red transit line and numerous area amenities. Currently leased at an occupancy rate of approximately 87 percent, the Sunset Media Center provided Kilroy Realty Corp. with one of the best value-add opportunities in the area. The new owner reportedly has the intention to execute extensive renovations of the building’s lobby, common areas and tenant spaces.
Being part of a submarket that has limited expansion potential for its office stock, investors like Kilroy aim to enhance the existing property’s value through “well-targeted improvements to the building’s aesthetics, amenities and energy efficiency,” said David Simon in a recent press statement. According to KRC’s executive vice president for the Los Angeles region, the property was attractive because it “is located in the heart of an increasingly desirable ‘live, work, and play’ submarket.”
As part of the financial terms of the acquisition deal, Kilroy Realty assumed a secured mortgage loan of approximately $54 million that bears interest at a rate of 5.23 percent and matures on January 1, 2016. The company also issued approximately $5 million in common limited partnership units of Kilroy Realty, LP.
The total fee that KRC paid for Sunset Media Center means a per-square-foot price of about $246, well above the median rate office properties traded for in Los Angeles in 2011, as the chart suggests. However, the property’s central placement in one of the city’s most sought-after areas should be indicative of the premium the buyer paid for the office building, when compared to median values.
Chart courtesy of marcusmillichap.com