Kilroy Realty Corp. (KRC), a real estate investment trust (REIT), has recently acquired two office properties in Bellevue, Washington and San Diego, California, as part of its long-term strategy to own high-quality assets at below-replacement cost prices in areas that provide strong near-term cash flows and attractive long-term appreciation potential. The properties spanning across 663,000 square feet of office space were acquired for a total of $247.7 million.
Kilroy purchased ‘KeyCenter’ – a 488,000 square feet office property in Bellevue, for $215 million in one of the biggest real estate transaction of the region so far in 2011. The purchase price was worth approximately $440 per square foot, which was well below the present market price of about $547 per square foot. The property is currently 88% occupied.
At the same time, the company also acquired ‘10770 Wateridge Circle’ – a 174,000 square feet office building in San Diego for $32.7 million. Built in 1989, the two-storied property is presently 98% occupied. The property is located in the Sorrento Mesa submarket, where the company already owns about a dozen other properties. Consequently, the acquisition is expected to generate operational synergies for the company.
With the latest string of acquisitions, Kilroy has acquired four office properties year to date in key West Coast submarkets. The aggregate cost of transaction for the purchase of approximately 1.0 million square feet of office space was $380.8 million.
Furthermore, the company is presently under various stages of negotiation to acquire additional six properties for about $414 million. Out of these, four are located in Northern California, while the remaining two are located in the Southern California region. These acquisitions are expected to be complete in the second half of the current fiscal.
Kilroy owns, develops and manages a diverse portfolio of office, industrial and multi-purpose real estate properties primarily in the coastal regions of Los Angeles, Orange County, San Diego, greater Seattle and the San Francisco Bay Area. At March 31, 2011, the company owned 10.5 million rentable square feet of commercial office space and 3.6 million rentable square feet of industrial space.
Kilroy maintains an active multi-year development program focusing on the economically dynamic locations characterized by strong long-term demand, limited supply, and high barriers to entry. As such, most of the properties of the company are concentrated in the coastal submarkets of Southern California that offer both a vibrant economic backdrop for businesses and a unique quality of life for their employees.
Currently, we have a ‘Neutral’ recommendation and a Zacks #3 Rank on Kilroy that translates into a short-term ‘Hold’ rating. We also have a ‘Neutral’ recommendation and a Zacks #3 Rank for MPG Office Trust, Inc. (MPG), a competitor of Kilroy.
KILROY REALTY (KRC): Free Stock Analysis Report
Be the first to comment