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KBS CEO Eyeing OC for Office Investments

SoCal Market Metrics Strong, Says DeLuca

After selling off its final local asset in 2020, Newport Beach-based KBS is considering reentering the Orange County market via strategic office investment opportunities.

“We are tracking 30 markets extremely closely, specifically markets with a strong employee base, good quality of life and school systems,” CEO Marc DeLuca told the Business Journal.

“Orange County is one of those markets.”

DeLuca took over the CEO role from Chuck Schreiber at the start of the year after overseeing the company’s Eastern region for the past eight years. Schreiber, who previously served as CEO for 23 years, is now president and chairman of the commercial real estate investor, which in addition to offices invests in industrial, apartments and other property types.

Schreiber is the “S” in KBS; the other two company founders are the late Don Koll and Peter Bren, the late brother of Irvine Co.’s Donald Bren. Schreiber has served on the board and executive committee of Irvine Co. since August 2016, according to regulatory filings.

 

Nashville Push

KBS, one of the country’s most active office investors for over a decade via a variety of real estate investment trusts and other vehicles, continues to be on the hunt for acquisitions. In April, it spent $175 million for a 29-story office tower in downtown Nashville, Tenn., a city that’s become a hotbed of investment from OC businesses in a variety of industries.
“Downtown Nashville is exploding,” DeLuca said.

The firm is investing in amenity upgrades at the 605,000-square-foot UBS Tower—like dog parks and outdoor gathering areas—to help lure employees back to the office.

“In the past 60 days we’ve leased two floors of office space there,” DeLuca said.

Across its various investment platforms, KBS owns some 19 million square feet of office space.

 

Markets

KBS is interested in core plus office opportunities in Orange County, “where assets are coming back at a larger volume than some of our other markets.”

Employee occupancy rates are hovering around 70% in markets like OC and San Diego, much higher than the 30% to 35% seen in Northern California markets such as San Francisco, DeLuca notes.

“The metrics in those Southern California markets bodes well for future investment.

“We are always looking into good opportunities to divest properties, while we also look for solid investment opportunities in our markets,” DeLuca said.

 

REIT Sale

KBS marked its portfolio departure from the OC market about a month before the onset of the pandemic.

KBS Growth & Income REIT Inc., one of the firm’s nontraded REITs, sold The Irvine Tech Center, a 101,161-square-foot office near John Wayne Airport for $25.4 million.

KBS’ most recent local buy was in 2018 when it bought the 21-story City Tower in Orange for $147 million, among the largest deals of the year.

In 2019, control of the KBS Strategic Opportunity REIT that bought the building was transferred to L.A.-based Pacific Oak, a real estate management firm whose executive have ties to KBS. Pacific Oak last year sold City Tower to New York-based investment firm Opal Holdings for $150.5 million, one of the top local real estate deals of the year.

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