A sale of its 3.4-million-square-foot industrial portfolio in Orange County may not be the only local disposition in the works for Kilroy Realty Corp.
A story in last week’s Business Journal gave an update on plans for Kilroy, a Los Angeles-based landlord that owns more than 12 million square feet of office properties along the West Coast, to sell its OC-based industrial portfolio by the end of the year.
The company said late last month that it is under contract to sell the 39-building industrial portfolio in two pieces. Real estate sources point to Irvine-based real estate investor LBA Realty and financial-services giant TIAA-CREF as the expected buyers of the properties.
Kilroy officials haven’t disclosed the potential buyers’ names but said they expect to see proceeds of about $355 million from the sale, which also includes five smaller offices in OC and Ventura County.
Kilroy officials, in an Oct. 31 call with analysts, also pointed to its office portfolio in OC as a potential source of dispositions over the next year or so, if the company decides to sell any more assets.
“We’re not a meaningful player there,” Chief Executive John Kilroy said in the analyst call, speaking of OC’s office market.
Acquisitions or development wouldn’t add much to the company’s position in the market, Kilroy said.
He said Newport Beach-based Irvine Company “is in the catbird seat.”
Kilroy Realty—following the impending industrial portfolio sale—will own four offices in the county, totaling about 500,000 square feet. The buildings were about 96% leased at the end of September.
Its most prominent office is 2211 Michelson in Irvine. Kilroy bought it in 2010 for $103.4 million.
The 5-year-old building, which runs about 271,000 square feet, is now likely worth an additional $20 million or more, based on rising sale prices for high-end offices in OC recently.
The other buildings Kilroy owns are in Anaheim, Orange and the Irvine Spectrum.
The landlord didn’t disclose during the analyst call which of the local buildings it would consider selling, or a specific time frame for such a deal.
Hawaii Flip
An affiliate of Irvine-based Thompson National Properties is buying a shopping center on the Hawaiian island of Maui and also has a deal in place to sell another center it owns in Oahu.
The company’s TNP Strategic Retail Trust Inc., a non-traded real estate investment trust, said last month that it is moving ahead with the acquisition of the Lahaina Gateway Center, a neighborhood retail center in Maui that was constructed in 2008 and counts 136,683 square feet of retail space. It’s about 80% leased.
The property was foreclosed on about a year ago by a bank that owned the center’s construction loan. Local reports said the property was carrying two mortgages totaling about $48 million prior to being foreclosed on by Honolulu-based Central Pacific Bank.
Terms of the planned purchase—which involves the leasehold interest in the 11.4-acre Lahaina property—have not been disclosed. TNP officials said the company is purchasing the property “at a substantial discount” to the bank’s construction loan.
TNP is also planning to sell its Waianae Mall Shopping Center, a drug store-anchored shopping center in Oahu that runs about 170,000 square feet. A deal should close late this year or in early 2013.
It bought the Waianae Mall in 2010, paying a reported $25.7 million. The upcoming sale’s terms and buyer’s identity haven’t been disclosed.
TNP officials said they should see “a significant return on investment” from the latest deal, and that it will redeploy proceeds from the sale into other opportunities.
Strong Sales
Santa Ana-based developer Nexus Cos. said a retirement community it is building near Hoag Hospital in Newport Beach is approximately one-third leased, about a year prior to the project’s opening.
The company’s high-end Vivante on the Coast development in Costa Mesa’s Newport Mesa area has secured more than 60 reservations from prospective residents, the company said. The project, which broke ground in April, will hold 185 residences.
“The community is set to open fall 2013. At this pace, I expect us to be almost fully leased (at its opening),” Nexus Chief Executive Curt Olson said.
Monthly rents for a majority of the units at Vivante—which range from studios running about 450 square feet to two-bedroom units nearing 1,200 square feet—start near $4,000 and can go to nearly $6,700.
