SAN DIEGO-Kilroy Realty Corp. of Los Angeles has acquired three office buildings totaling 190,600 square feet at the four-building Mission City Corporate Center for $52.55 million from L.A.-based MPG Office Trust in a deal that follows Kilroy’s acquisition in March of an 88,795-square-foot building at the Mission City complex for nearly $18 million. Kilroy acquired the 190,600 square feet by assuming the debt on the property, according to public filings by the L.A.-based REIT, which has acquired a number of office buildings throughout California lately.
Although Kilroy took title to the four-building office complex in two separate transactions that closed months apart, MPG accepted the L.A.-based company’s offer to buy the entire Mission City Corporate Center in the first quarter, according to managing director Bob Prendergast of the San Diego office of Jones Lang LaSalle, who was part of a team including Lynn LaChapelle of JLL’s San Diego office and Michael Zietsman of the company’s Los Angeles office who represented MPG on both of the transactions. Prendergast explains that MPG retained JLL to market the entire Mission City Corporate Center, but the sale was split into two transactions because the 88,000-square-foot building that sold in March and the three that Kilroy acquired recently were financed separately.
The sale of the 88,795-square-foot building, which is at 2385 Northside Dr., closed quickly because the financing on it was a construction loan. The transaction involving the other three buildings―at 2355, 2365 and 2375 Northside Dr.―closed later because it was financed with a conduit loan and the approval process for the assumption of that loan took longer to complete.
The Mission City office campus, completed between 1988 and 2008, includes a six-story building at 2375 Northside and three-story buildings at the other addresses. JLL has been retained as the leasing agent for the buildings, which were 78% occupied at the time of sale. Executive vice president Bess Wakeman of JLL’s San Diego office heads leasing for the Mission Valley submarket in which the Mission City project is located.
Prendergast tells GlobeSt.com that the four-building class A complex attracted multiple offers, primarily from institutional investors, including REITs and pension fund advisers. Among other factors that made the property appealing to prospective buyers, he says, were the quality of the assets and the attractive assumable financing.
The debt that Kilroy assumed in the larger of the two deals bears interest at a weighted average annual fixed rate of 5.1% and matures on April 1, 2012. MPG said in announcing the transaction that it disposed of a non-core asset and eliminated $52 million of debt. It said that it used proceeds of the $18 million disposition of 2385 Northside to repay the $17.6 million construction loan that was scheduled to mature in August this year and eliminated a $4 million repayment guaranty. The dispositions are the latest in a series of moves that MPG has made over the last year or more to reduce its huge debt, much of which it took on in 2007 when it acquired a portfolio of former EOP Orange County office properties, a number of which it has now shed either through sales or voluntary defaults returning them to lenders.
Kilroy has been on a different track, acquiring rather than selling assets. It bought a 732,000-square-foot office building and an attached parking structure at 303 Second St. in San Francisco recently for $233 million and acquired the 2211 Michelson Dr. building in Irvine recently for $103 million. In addition, it acquired a 98,551-square-foot office building 999 Town & Country Rd. in the City of Orange for $22.25 million.