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Kilroy Realty Corporation (NYSE: KRC) has successfully acquired West 8th, a fully leased 28-story office building in Seattle, for $490 million. The property, comprising 539,000 square feet, is strategically located near Amazon's headquarters and adds significant value to Kilroy's portfolio. The acquisition is expected to bolster Kilroy's tenant credit profile and provide opportunities to increase below-market rents as leases expire. This move enhances Kilroy's presence in a prime technology office market, supporting anticipated rental growth and earnings.
Positive
Acquisition of West 8th boosts Kilroy's portfolio to nearly 3 million square feet in Seattle.
Potential for rental income growth due to below-market rents and tenant credit profile enhancement.
Strategic location near Amazon's headquarters provides strong demand for office space.
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Fully Leased Seattle Highrise Offers Near Term Accretion With Releasing Upside
LOS ANGELES--(BUSINESS WIRE)--
Kilroy Realty Corporation(NYSE: KRC) today announced that it completed the acquisition of West 8th, a 28-story, LEED Platinum, 539,000 square foot office building in Seattle. The premier office project is located in the vibrant and highly amenitized Denny Regrade submarket. Anchored by Amazon, Inc., West 8th will bring immediate strategic benefits, including enhancement to the company’s already strong tenant credit profile, the potential to increase below-market rents on a near term expiration and the expansion of the company’s best-in-class office portfolio that meets the needs of the modern tenant.
West 8th, built in 2009, is located directly across the street from Amazon’s nearly five million square foot newly constructed headquarters campus. The project includes unmatched transit access and proximity to numerous retail amenities and features a walk score of 100 and a transit score of 100. The building is fully leased and anchored by Amazon, which leases approximately 70% of the space through April 2023 at rents significantly below market.
The $490 million acquisition will increase the company’s Greater Seattle portfolio to just under three million square feet, including the recently completed and fully leased 333 Dexter project. Additionally, West 8th is just two blocks from the company’s SIXO development site, which is planned for a two-phased office development totaling approximately one million square feet, alongside a separate parcel which can accommodate up to 600 multifamily rental units. The West 8th project further expands the company’s presence in one of the premier technology office markets in the country.
“We believe the Denny Regrade submarket continues to be extremely well positioned for strong rental growth over the coming years and West 8th, which offers an unrivaled location, will help deliver solid earnings growth and value creation for our shareholders,” said John Kilroy, the company’s chairman and chief executive officer.
About Kilroy Realty Corporation
Kilroy Realty Corporation (NYSE: KRC, the “company”, “Kilroy”) is a leading U.S. landlord and developer, with operations in San Diego, Greater Los Angeles, the San Francisco Bay Area, the Pacific Northwest and Austin, Texas. The company has earned global recognition for sustainability, building operations, innovation and design. As pioneers and innovators in the creation of a more sustainable real estate industry, the company’s approach to modern business environments helps drive creativity and productivity for some of the world’s leading technology, entertainment, life science and business services companies.
Kilroy is a publicly traded real estate investment trust (“REIT”) and member of the S&P MidCap 400 Index with more than seven decades of experience developing, acquiring and managing office, life science and mixed-use projects.
As of June 30, 2021, Kilroy’s stabilized portfolio totaled approximately 14.2 million square feet of primarily office and life science space that was 91.8% occupied and 93.6% leased. The company also had more than 1,000 residential units in Hollywood and San Diego, which had a quarterly average occupancy of 71.9%. In addition, Kilroy had seven in-process development projects with an estimated total investment of $2.9 billion, totaling approximately 3.4 million square feet of office and life science space. The office and life science space was 57% leased, which included the June commencement of the KOP 2 project.
A Leader in Sustainability and Commitment to Corporate Social Responsibility
Kilroy is listed on the Dow Jones Sustainability World Index and has been recognized by industry organizations around the world. Kilroy’s stabilized portfolio was 74% LEED certified, 42% Fitwel certified, the highest of any non-government organization, and 72% of eligible properties were ENERGY STAR certified as of June 30, 2021.
The company has been recognized by GRESB, the Global Real Estate Sustainability Benchmark, as the listed sustainability leader in the Americas for six of the last seven years. Other honors have included the National Association of Real Estate Investment Trust’s (NAREIT) Leader in the Light award for six consecutive years and ENERGY STAR Partner of the Year for eight years as well as ENERGY STAR’s highest honor of Sustained Excellence, for the past six years.
A big part of the company’s foundation is its commitment to enhancing employee growth, satisfaction and wellness while maintaining a diverse and thriving culture. For the second year in a row, the company has been named to Bloomberg’s Gender Equality Index—recognizing companies committed to supporting gender equality through policy development, representation, and transparency.
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are based on our current expectations, beliefs and assumptions, and are not guarantees of future performance. Forward-looking statements are inherently subject to uncertainties, risks, changes in circumstances, trends and factors that are difficult to predict, many of which are outside of our control. Accordingly, actual performance, results and events may vary materially from those indicated or implied in the forward-looking statements, and you should not rely on the forward-looking statements as predictions of future performance, results or events. Numerous factors could cause actual future performance, results and events to differ materially from those indicated in the forward-looking statements, including, among others: global market and general economic conditions and their effect on our liquidity and financial conditions and those of our tenants; adverse economic or real estate conditions generally, and specifically, in the States of California, Washington and Texas; risks associated with our investment in real estate assets, which are illiquid, and with trends in the real estate industry; defaults on or non-renewal of leases by tenants; any significant downturn in tenants’ businesses; our ability to re-lease property at or above current market rates; costs to comply with government regulations, including environmental remediation; the availability of cash for distribution and debt service and exposure to risk of default under debt obligations; increases in interest rates and our ability to manage interest rate exposure; the availability of financing on attractive terms or at all, which may adversely impact our future interest expense and our ability to pursue development, redevelopment and acquisition opportunities and refinance existing debt; a decline in real estate asset valuations, which may limit our ability to dispose of assets at attractive prices or obtain or maintain debt financing, and which may result in write-offs or impairment charges; significant competition, which may decrease the occupancy and rental rates of properties; potential losses that may not be covered by insurance; the ability to successfully complete acquisitions and dispositions on announced terms; the ability to successfully operate acquired, developed and redeveloped properties; the ability to successfully complete development and redevelopment projects on schedule and within budgeted amounts; delays or refusals in obtaining all necessary zoning, land use and other required entitlements, governmental permits and authorizations for our development and redevelopment properties; increases in anticipated capital expenditures, tenant improvement and/or leasing costs; defaults on leases for land on which some of our properties are located; adverse changes to, or enactment or implementations of, tax laws or other applicable laws, regulations or legislation, as well as business and consumer reactions to such changes; risks associated with joint venture investments, including our lack of sole decision-making authority, our reliance on co-venturers’ financial condition and disputes between us and our co-venturers; environmental uncertainties and risks related to natural disasters; our ability to maintain our status as a REIT; and uncertainties regarding the impact of the COVID-19 pandemic, and restrictions intended to prevent its spread, on our business and the economy generally. These factors are not exhaustive and additional factors could adversely affect our business and financial performance. For a discussion of additional factors that could materially adversely affect our business and financial performance, see the factors included under the caption “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2020 and our other filings with the Securities and Exchange Commission. All forward-looking statements are based on currently available information and speak only as of the dates on which they are made. We assume no obligation to update any forward-looking statement made in this press release that becomes untrue because of subsequent events, new information or otherwise, except to the extent we are required to do so in connection with our ongoing requirements under federal securities laws.
