Kilroy Acquires CA Office Space (KRC) (MPG)

Zacks

Kilroy Realty Corp. (KRC), a real estate investment trust (REIT), has recently acquired an office property in the South of Market district of San Francisco, 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 company further intends to make certain renovations to the acquired property over time to enhance its value.

Kilroy purchased ‘201 Third Street’ – a 311,455 square foot 12-story office property, for $103.3 million. The building, currently 90% occupied, is strategically located adjacent to the Moscone Center – the largest convention and exhibition complex in the region. In addition, the property offers amenities such as higher finished ceilings, increased natural light and collaborative meeting areas, which are expected to better suit the demands of technology and media tenants of the region.

Furthermore, the property offers superior communication facilities such as the Caltrain – a California commuter rail line on the San Francisco Peninsula and in the Santa Clara Valley (Silicon Valley) in the U.S.; Bay Area Rapid Transit (BART) – a rapid transit system serving the San Francisco Bay Area; and the new Transbay Transit Center – a transportation complex in San Francisco.

With the latest transaction, Kilroy has acquired six office properties year to date in key West Coast submarkets. The aggregate cost of transaction for the purchase of approximately 1.5 million square feet of office space was $516 million. The company is also presently under various stages of negotiation to acquire three more properties for about $163 million.

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. As of June 30, 2011, the company owned 11.5 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 focused 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 #2 Rank (short-term ‘Buy’) for MPG Office Trust, Inc. (MPG), a competitor of Kilroy.

KILROY REALTY (KRC): Free Stock Analysis Report

MPG OFFICE TRST (MPG): Free Stock Analysis Report

Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.

Be the first to comment

Leave a Reply