Newport Beach’s KBS Realty Advisors has another record-setting office deal in the works.
An affiliate of the private equity real estate company—one of the most active commercial real estate investors in the country this year—has entered into an agreement to buy a skyscraper in downtown Los Angeles for $208 million.
The company disclosed in a regulatory filing last week that one of its non-traded real estate investment trusts has entered into an agreement to buy Union Bank Plaza, a 40-story office at 445 South Figueroa St.
KBS Realty officials declined to comment until the sale has closed.
The sale of Union Bank Plaza would be the most expensive office deal seen in Los Angeles in two years, and appears to be the priciest office sale in Southern California so far this year.
Union Bank of California, the second-largest commercial bank headquartered in the state, leases a majority of the building, which is 96% full.
A sale of the 627,334-square-foot office, which is being sold by a unit of Houston-based Hines Interest LP, had been in the works for a few months. KBS was rumored to be the likely buyer a few weeks ago.
The tower, the 20th tallest office in Los Angeles, is set to trade hands at $332 per square foot.
KBS plans to make some $16.2 million of renovations and improvements to the tower, the company said in a filing with the Securities and Exchange Commission.
For KBS, which invests money for pension funds and also has a series of non-traded real estate investment trusts that raise money from individual investors, the deal’s just the latest in a string of blockbuster acquisitions that it recently has made.
Last month, the company’s KBS REIT II Inc. closed on a $655 million buy of a recently built skyscraper in Chicago in a deal that could end up being the country’s priciest single-asset office sale of the year. Hines also was the seller of the 1.3 million-square-foot Chicago tower.
KBS REIT II also is the KBS affiliate buying the Los Angeles tower. The non-traded investment trust has raised some $1.1 billion since 2008.
KBS said it plans to fund the Union Bank Plaza buy with proceeds from a mortgage loan—the terms of which it still is negotiating—as well as cash it has raised for the trust.
The sale would be the priciest office deal in Los Angeles since the 48-story Citigroup Center building in the Bunker Hill area sold for $280 million two years ago, according to data from New York-based research firm Real Capital Analytics Inc.
It also appears to be the most expensive deal seen in the Southern California region so far this year.
Top OC Deal
Orange County’s top office deal was the $103 million sale of Irvine’s 2211 Michelson office, which also was sold by a partnership led by Hines. KBS was a bidder for that tower but lost out to Los Angeles-based Kilroy Realty Corp.
Both deals still are eclipsed by the sale of a Wells Fargo-occupied high-rise in San Francisco this summer to a group of South Korean investors.
The Union Bank Plaza acquisition falls into KBS’ strategy of buying high-quality assets that largely are full and have little risk of losing major tenants.
The well-leased building brings in about $16.3 million annually in rents. Union Bank occupies 55% of the tower and has a series of leases that run through 2022.
The building has served as the bank’s Los Angeles headquarters since it was built in 1967.
The rest of the building is occupied by more than 30 tenants, with none of them occupying more than 10% of the tower, according to SEC filings.
The goal for most of KBS’ investment funds is to buy “assets without leasing risk,” Chief Executive Charles Schreiber told the Business Journal last month.
KBS is a venture of Peter Bren, brother of Irvine Co. chairman Donald Bren, and Schreiber, a former Koll Development Co. executive. The company started up in 1992 and has made more than $17.6 billion in deals since its founding.
The “K” in KBS is for commercial real estate executive Donald Koll, who was involved with the company early on.
