Kilroy Makes $145M Move on Two Seattle Office Properties, Preps for $186M More
- Jun 06, 2012
By Gail Kalinoski, Contributing Editor
Kilroy Realty Corp. continues expanding up the West Coast, adding two Seattle-area office properties for $145 million and getting ready to close on the 24-story Skyline Tower in downtown Bellevue, Wash., for $186 million. The $331 million Seattle shopping spree comes just months after making more than $360 million in two Silicon Valley investments.
Seattle will continue to play an important role in the expansion of our West Coast real estate franchise and the growth of our brand as the region’s most innovative landlord, said John Kilroy Jr., president & CEO.
The Seattle acquisitions will nearly double the Los Angeles-based REIT’s office portfolio in the Puget Sound region. Once the Skyline Tower purchase closes, KRC will have acquired approximately 1.7 million square feet of space in Seattle and several submarkets since it re-entered the market two years ago. The Seattle portfolio now represents 10 percent of KRC’s holdings on a square-foot basis and accounts for approximately 13 percent of its annual net operating income on a pro forma basis, according to the REIT.
In two separate transactions, KRC acquired a three-building, 420,000-square-foot office campus located at 701, 801 and 837 N. 34th Street in Seattle’s Fremont neighborhood of Lake Union for $145 million. The buildings, known as Fremont Lake Union Center and Fremont Lake View, are located on the waterfront and fully leased to high-tech tenants like Adobe, Inc., Tableau Software and Ubermind. The campus has a long-term ground lease and KRC is assuming about $34 million in debt.
Seattle’s Bellevue, Eastside and Lake Union submarkets present a compelling set of characteristics that KRC looks for in its real estate portfolio, Kilroy said. He cited an economically vibrant core, unique coastal location, and a quality of life regional approach to development that effectively limits supply.
The third separate acquisition, the 417,000-square-foot Skyline Tower at 10900 Northeast Fourth St. in downtown Bellevue, is in escrow and is expected to be completed in the third quarter. KRC is buying the Class A, LEED Silver-certified building from Beacon Capital Partners. It is 92 percent leased to tenants including Expedia and Valve Corp. KRC will assume an in-place loan of approximately $84 million. The property is two blocks from the Key Center, a 488,470-square-foot, office building that KRC bought last year for approximately $215 million.
With the purchase of the Skyline Tower, KRC will own two of the top Class A multi-tenant office buildings in downtown Bellevue, said Mike Shields, a senior vice president of KRC’s Pacific Northwest region. We expect downtown Bellevue to continue to be a location of choice for both technology and service companies that value high quality amenities, proximity to mass transit and commuter convenience.
KRC has been actively seeking acquisition opportunities and value-add opportunities, including development and redevelopment. Last month the REIT announced it investing about $200 million to construct a 314,000-square-foot office campus for Synopsys, Inc., in California’s Silicon Valley. KRC will develop, own and manage the two buildings for the firm. In February, KRC bought the Menlo Corporate Park in Menlo Park, Calif., for about $162.2 million. That seven-building office park was 79 percent occupied at closing.
Sales have been active in the Seattle office market in recent months. In April, Clarion Partners bought 1600 Seventh Ave., a 32-story, downtown Seattle office building known as Qwest Plaza, from CenturyLink for $137 million. Earlier in the month, CommonWealth Partners purchased the Russell Investments Center for $480 million from Northwestern Mutual. Located at 1301 Second Ave. in the CBD, the 42-story building was considered one of the top assets in the market.