SEATTLE-Those who follow @GlobeStcom on Twitter and @GlobeStLIVE may have seen a post teasing the announcement, but GlobeSt.com has learned that Kilroy Realty Corp. has closed on the purchase of Westlake Terry, a two building 320,399-square-foot, class-A office property in the Seattle submarket of South Lake Union for approximately $170 million.
Westlake Terry is currently 100% leased to a tenant base that includes Group Health Cooperative and Microsoft Corp., which collectively account for more than 85% of the property.
As part of the acquisition, the company assumed an in-place loan of approximately $84 million that bears interest at 6.05%.
As GlobeSt.com previously reported, the asset was on the block this fall, and industry sources told GlobeSt.com at the time that the asset could fetch close to $200 million. The LEED Gold certified property was built in 2007 and occupies a full city block at 320 Westlake Ave. North and 321 Terry Ave. North. The property is located on one of Seattle’s main mass transit arterials, Westlake Avenue, as well as directly adjacent to the South Lake Union Transit Line.
“Westlake Terry encompasses all the compelling characteristics that we seek to include in our portfolio—strong submarket fundamentals, adjacency to transportation and abundant amenities as well as proximity to an anchor corporate user,” says John Kilroy Jr., the company’s president and chief executive officer, in a prepared statement. “In today’s environment where core pricing has been extremely aggressive, it is our platform and franchise that have provided us with a competitive advantage to allow us to unlock the value of this acquisition and achieve an in-place cap rate in the mid 6% range on a fully-leased premier asset.”
According to Mike Shields, SVP of KRC’s Pacific Northwest region, “We expect South Lake Union to continue to be a vibrant, highly desirable market that offers all the amenities and a quality of lifestyle that tenants seek, evidenced by the growing corporate user base in the market.”
KRC now owns approximately 2.1 million square feet of premier office space in the Puget Sound Region, including the Eastside submarkets of Bellevue, Kirkland and Redmond and the Lake Union submarket in Seattle. The Pacific Northwest portfolio represents approximately 13% of KRC’s overall annual net operating income on a pro forma basis.
Attorneys Peter Roth, Patrick Perry, Michael Cerrina, Julie Hoffman, Hadar Goldstein, Cheryl Prell of Allen Matkins Leck Gamble & Natsis represented Kilroy. Vulcan Realty was represented by Joe Delaney at Foster Pepper PLLC. The seller’s broker was Jones Lang LaSalle.
Allen Matkins undertook a multi-discipinary approach to meet the complexities of this deal, according to the firm. Goldstein and Cerrina worked on the loan assumption, while Hoffman and Roth negotiated and oversaw the purchase agreement and diligence, with Prell leading the lease review/abstract/estoppel process. Perry helped coordinate the entitlement review with local counsel.
Kilroy isn’t the only company that thinks the Lake Union area is hot for office. As GlobeSt.com recently reported, Capstone Partners and its partner, Stockbridge Capital Group plan to soon begin construction on Dexter Station, a 340,000-square-foot office building located at 1101 Dexter Ave. And while sources involved remain mum on the total construction cost, an unidentified source confirms to GlobeSt.com that it is just around $136 million. In fact, Stephen Pilch, managing director and COO of Stockbridge, said that “Seattle is currently one of the best office markets in the US.”
What are you seeing in the Seattle office market? Are these firms on the right track with investments there? Please weigh in and comment below.