A Singapore-based joint venture, Keppel-KBS US REIT, which has already made a splash in the Puget Sound region commercial real estate market last year is planning to take down more space on the Eastside. The company announced earlier this week that it would be spending $169.4 million to acquire the 21-building, Westpark Portfolio business campus in Redmond, which is home to such companies as Facebook’s Oculus virtual reality unit, Microsurgical Technology, Seattle Aero and Kone, to name a few.
The subject property, located at 8200 – 8644 154th Ave. NE in Redmond, is owned by Newport Beach, CA-based KBS. The campus consists of 21 suburban office/flex/ industrial buildings, totaling 778,472 square feet over 41 acres. It is situated on grounds in a park-like setting with easy access to SR-520/I-405 and in close proximity to Redmond Town Center and Microsoft World Headquarters. Westpark Business Park is located minutes from downtown Redmond, Marymoor Park and Redmond Town Center. Positioned on easy transit routes and less than one-half mile away from the Redmond Transit Center.
“The acquisition of the Westpark Portfolio will strengthen Keppel-KBS US REIT’s foothold in the high growth Seattle MSA. This will allow the REIT to capitalize on strong leasing demand from the technology and professional services sectors in a supply-constrained market, with limited sites available for competitive new development. At the same time, Seattle, being one of the strongest office markets in the United States, will allow the REIT to benefit from steady rent growth of approximately 4 percent by 2020,” said David Snyder, CEO and CIO of Keppel-KBS US REIT in a statement. “The acquisition is expected to be yield accretive and is in line with our strategy to acquire distinctive assets in first choice submarkets and create long term value for our [shareholders].”
Since the acquisition in February 2016 by KBS, the Westpark Portfolio has undergone repositioning and extensive capital improvements, including the conversion of underutilized space to an amenities centre, the firm stated. The successful repositioning has garnered strong leasing traction among a diversified tenant base, concentrated mainly in the technology and professional services sectors. This includes Oculus VR, a technology company backed by Menlo Park, CA-based Facebook, that specializes in virtual reality hardware and software products.
The Westpark Portfolio has a committed occupancy of 97.7 percent and has a weighted average lease expiry of 4.3 years, allowing the new ownership to capitalize on the low vacancy of the Redmond market as the leases begin to roll.
The strategic addition of the Westpark Portfolio will increase Keppel-KBS US REIT’s aggregate valuation by 20.8 percent to US$985.5 million, according to the company, and net leasable assets will increase by 24.2 percent to more than 4 million square feet.
The company will finance the acquisition with the proceeds from equity fund raising, debt financing and internal cash resources.
The joint venture between Keppel and KBS had already made two acquisitions into the portfolio in the region. In November of 2017, the REIT spent $371.1 million to acquire two assets also on the Eastside. The Plaza Buildings, located at 10800 and 10900 NE 8th Street in Bellevue, were purchased for $240 million, or roughly $489 per leasable square foot, while the Bellevue Technology Center, located at 15805 NE 24th Street, was acquired for $131.1 million, or $396 per leasable square foot. The valuation of the Technology Center takes into account the vacant lot, which may be developed in the future.