Kilroy Realty Corp. (NYSE: KRC) is cashing out on Orange County.
The Los Angeles-based real estate investor, with a West Coast office portfolio topping 13 million square feet, recently listed for sale its sole OC property, the 2211 Michelson office tower near John Wayne Airport.
When Kilroy bought the nearly 272,000-square-foot, 12-story tower in 2010, it paid about $103 million, or about $380 per square foot.
It’s now looking for a price in the $125 million range, or $460 per square foot, according to real estate sources familiar with the listing.
The property’s being marketed for sale by Eastdil Secured.
If sold at its reported asking price, it would be one of just five Class A office properties in OC to sell for a price topping $120 million over the past three years, according to data from real estate market tracker CoStar Group Inc.
The other four sold for prices in the $340 to $400 per square foot range, well below what Kilroy is seeking, according to CoStar records.
2211 Michelson opened in 2007, the first of several offices towers built in the airport market prior to the Great Recession. It’s currently about 94% leased, according to brokerage records; coworking giant WeWork recently struck a deal to take some 70,000 square feet of space there. It’s expected to open later this year, and is taking the space being vacated by Pathway Capital Management LP, OC’s second-largest registered investment adviser (see story and list, starting on page 30).
Pathway is moving local operations a few blocks away, to The Boardwalk development along Jamboree Road.
Other large tenants at 2211 Michelson include Edwards Lifesciences Corp. and Burnham Benefits Insurance Services Inc.
Stiff Competition
The white metal-paneled building brings in close to $9 million in rents annually, and monthly rents average about $3.14 per square foot, Kilroy reported in its latest annual report.
If sold, it would complete a long-running, winding down of its OC operations; it owned close to 4.4 million square feet of office and industrial buildings in OC as of seven years ago.
It sold its entire industrial portfolio—which included numerous properties throughout OC—at the end of 2012 in a $500 million deal. A few smaller office sales followed over the next few years.
Chairman and Chief Executive John Kilroy Jr. previously said he saw OC as a nonstrategic market for the company, despite its significant holdings in Los Angeles and San Diego counties.
That’s because of the dominance of Newport Beach-based Irvine Co. in owning high-end buildings in OC, Kilroy said in 2013.
“You have to be careful that you have exactly the right product, and you have to be a [market] timer because of that big beast called the Irvine Company,” Kilroy said at the time.
