Kilroy Grabs 588,000 SF with $237.5M Purchase of Two West Coast Properties

The biggest catch of the two purchases is 100 First Plaza, a 466,000-square-foot office asset for which the REIT paid $191.5 million.

November 11, 2010
By Barbra Murray, Contributing Editor

Courtesy Flickr Creative Commons user dherrera_96

Kilroy Realty Corp., a longtime office and industrial property player in the coastal markets along the West Coast, has just boosted its office portfolio by 588,000 square feet. In transactions valued at an aggregate $237.5 million, the company acquired 100 First Plaza in San Francisco and Overlake Office Center in suburban Seattle.

The biggest catch of the two purchases is 100 First Plaza, a 466,000 square-foot office asset for which the REIT paid $191.5 million. Developed in 1988, the 27-story tower sits in the city’s South Financial District and boasts a location just across from the new $4.2 billion, 1.3 million square-foot Transbay Terminal Center development project. “This acquisition is a perfect example of an opportunity that was not formally marketed, but one that we pursued, given our view that the asset will be substantially enhance in value by the Transbay Terminal improvements,” John B. Kilroy Jr., company president and CEO, said during a third-quarter earnings conference call. The property, which is LEED Gold-certified by the U.S. Green Building Council, is presently 94 percent leased.

Kilroy Realty also snapped up Overlake Office Center, shelling out $46 million for the 122,000 square-foot office property located just over 10 miles east of Seattle in Redmond, Washington. Carrying the address of 15050 NE 36th Street, Overlake Office Center sits across from Microsoft Corporation’s corporate headquarters, and the software company occupies every square foot of the 12-year-old building under a lease agreement that expires January 1, 2015. “This is an opportunistic buy in an off market transaction of a terrific asset, the prices below replacement cost, and well below recent sales in the area,” Kilroy said. “Building rents are below market, and a $30 million overpass that connects the property to Microsoft’s campus, is expected to open by year-end. The purchase marks Kilroy Realty’s reentry into the Washington market. Just as we had a previous track record in the Bay area, KRC has had a 30-year plus track record in the Greater Seattle area. We sold our last asset in 2007, as a cyclical peak in real estate values. We have a strong understanding of the dynamics of this market, and we believe in its continued growth, especially in affluent and tech-heavy locations like Bellevue Redmond corridor.”

In early November, Kilroy Realty’s operating partnership completed a $325 million offering of senior unsecured notes, garnering proceeds of approximately $322.2 million. The REIT noted that it would use a portion of the funds for the financing of two property purchases and for general corporate purposes. With the acquisition of 100 First Plaza and Overlake Office Center, Kilroy Realty’s office purchases for 2010 now total $667 million for nine properties accounting for 2 million square feet.