By Jon Peterson
Los Angeles-based Kennedy Wilson has put up for sale the eight-building property known as Redmond East in Redmond. It has a mixture of office, flex and warehouse space totaling 289,880 square feet. The pricing guidance on the sale is $80 million, or around $275 per square foot, according to sources that track the sale of major office assets in the greater Seattle market.
The seller has selected the CBRE office in Seattle as the listing agent on the sale. The team working on the transaction includes Tom Pehl and Lou Senini, both senior vice presidents with the firm. CBRE declined to comment when contacted for this story.
Kennedy Wilson did not respond to an email seeking comment for this story. The company has been the owner of the asset since May of 2018. The real estate investment firm had acquired the property for $52.1 million at that time, according to public records. It has done some new leasing to the property during ownership. One part of this was leasing up a building that was going to be vacant shortly after the acquisition of the property closed.
If the pricing guidance is accomplished on the sale, the asset would be traded at a low 6 percent cap, according to sources familiar with the property. This return would be based on the property’s existing net operating income.
Redmond East has two addresses in the assets in the property. Six of the buildings are located along 185th Avenue Northeast from 6565 to 6812. The other two buildings are located at 18578 and 18640 Northeast 67th Court. The assets in the property are all essentially fully leased. All of the buildings have two stories, and the asset is split up with 87 percent of the space being a mixture of office/flex and 13 percent being warehouse/industrial.
There are four major investment-grade tenants in the property. Bio-Rad Laboratories is the largest of these tenants, and it leases a total of 54,952 square feet. The other tenants are Microsoft, Spiration and Compass Group USA.
There will be a possibility for the new ownership to add some value to the asset in the future. The in-place rents are roughly 22 percent below existing market rents, according to some estimates. The weighted average lease term remaining is four years. All of the tenants in the property have been paying their rent since the start of COVID-19.
The Redmond submarket has remained very tight for both office and industrial property assets. Its office direct vacancy rate now stands at 2.8 percent, and the industrial availability rate is at 2.2 percent through the third quarter, according to sources that track this data.