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Jan 06 2015

Non-Traded REIT Buys Two Office Properties for $211 Million

KBS Real Estate Investment Trust III (KBS REIT III) recently announced two acquisitions with an aggregate purchase price of $211.35 million. In connection with the purchases, the REIT entered into two separate mortgages with combined borrowings of up to $137.7 million.

101 South Hanley

On December 24, 2014, KBS REIT III agreed to acquire 101 South Hanley in St. Louis, a multi-tenant office property with 346,451 rentable square feet which sits on 1.8 acres of land. The $62.3 million purchase price was funded with offering proceeds and $34.5 million from a $47.2 million mortgage secured by the property. The remaining $12.7 million of the loan may be used for tenant improvements, lease commissions, and capital improvements.

101 South Hanley is located in Clayton, St. Louis’s central business district, and is currently 92% leased to 28 tenants.



“We consider Clayton to be the most dynamic and attractive submarket in St. Louis,” said Ken Robertson, Regional President of KBS. “Clayton offers a strong amenity base embodying the live-work-play environment that tenants desire most.”

KBS REIT III plans significant improvements such as adding amenities like a new fitness center and conference lounge with outdoor patio. Plus, the REIT expects to modernize lobby areas, entrances, elevators, restrooms, and select common area corridors.

“In this market and across the country, we’ve seen an increase in demand for amenities. In that respect and others, we see a lot of potential in the property,” said Brett Merz, Senior Vice President of KBS. “We have plans to introduce modern amenities and design elements to this well-maintained building. We believe positioning this asset with an attractive set of on-site amenities will add a great deal of value for our tenants.”

3003 Washington

On December 30, 2014, KBS REIT III agreed to acquire 3003 Washington Boulevard in Arlington, VA, a multi-tenant office building with 211,170 square feet. The REIT paid $149.1 million to acquire the land and 100% of the Class A voting units of the single asset real estate investment trust that owned the building.

KBS REIT III used offering proceeds and $89 million of a $90.5 million mortgage secured by the property to fund the transaction.

3003 Washington’s construction was completed in 2014 and earned “Best Building” in its respective category by the Northern Virginia NAIOP chapter.

Despite being brand new, the building is already 95% leased, thanks in part to its proximity to the nation’s capital and nearby transportation centers.

“This new building has some wonderful tenants in the ranks, including The Common Application and The CNA Corporation,” said KBS Regional President Marc DeLuca. “We see this property as a great investment due to its proximity to the District of Columbia, the historically desirable Clarendon submarket, and its 24/7 amenity-rich environment.”

The building includes a fitness center, rooftop terrace, and 12,000 square feet of retail space.

“Beyond the considerable amenities, 3003 Washington Boulevard boasts three full sides of windowed glass, nine-foot ceilings, and a lobby of marble, black painted glass, and metal accents,” said KBS Senior Vice President Stephen Close. “We believe that the property’s location and amenities will help our tenants attract top talent from the RCB Corridor for their employee base.”

Through the end of September 2014, KBS REIT III had raised about $990 million of a $2 billion offering. At that time, it owned 14 properties that were 90% occupied according to data from MTS Research Advisors.

Article by: Dave LeGacy

Dave LeGacy covers all topics in Direct Investments with a focus on Oil and Gas, BDCs, and affiliate firms. If you have comments, ideas, or topic suggestions please email him at dave@thediwire.com.

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