Kilroy Closes on 13 Office Property Sale

SAN DIEGO-Those who follow @GlobeStcom on Twitter and @GlobeStLIVE may have seen a post teasing the announcement, but GlobeSt.com has learned that L.A-based Kilroy Realty Corp. has completed the disposition of 13 San Diego office properties in two tranches for total gross proceeds of approximately $327 million.

“The successful transaction demonstrates our team's ability to execute on our core investment philosophy and create meaningful value in each part of the real estate investment cycle,” says John Kilroy Jr., chairman, president and CEO of the firm. In aggregate, the portfolio included 1.1 million square feet and was approximately 91% leased.

As part of the company's capital recycling strategy, the company will reinvest the proceeds into its expanding West Coast office development program and other potential acquisition opportunities.

"The sales price reflects strong investor demand for well-located, high quality properties,” says Kilroy Jr.

The sale of 4910 Directors Pl. occurred in December 2013 and the sale of 12 other office buildings located at 10020 Pacific Mesa Blvd., 6055 Lusk Ave., 5010 and 5005 Wateridge Vista Dr., 15435 and 15445 Innovation Dr., and 15051, 15073, 15231, 15253, 15333 and 15378 Avenue of Science occurred in early January 2014.

HFF marketed the property on behalf of the seller. An affiliate of Starwood Capital Group Global, purchased the asset free and clear of existing debt.  HFF also arranged a variable-rateacquisition loan on behalf of the buyer through Wells Fargo Bank and CIBC as the senior lenders and Goldman Sachs as the mezzanine lender.

The firm is also buying in San Diego. In September, for example, the firm took a stronger foothold in San Diego's Del Mar Heights submarket, as GlobeSt.com reported, with the purchase of the Heights at Del Mar office park, which sold for $126.35 million. According to Kilroy SVP Steve Scott, “the Heights in Del Mar is consistent with KRC's strategy of growing its commercial real estate portfolio with quality assets in locations with strong fundamentals including access to transportation and abundant amenities. The ability to expand the campus to meet growing demand created by the synergy of the area and burgeoning cluster industries was of great appeal to us.”

In addition, recently, as GlobeSt.com reported, the company has been breaking ground on new office projects further north. The firm is boosting its Bay Area construction pipeline to more than 1.8 million square feet with new office-project starts in downtown Redwood City and the brick and timber commercial neighborhood of Brannan Street in the city's booming SOMA district. More than 1.3 million square feet of the company's Bay Area construction pipeline is pre-leased.