Kilroy Realty Corp. completed the acquisition of two properties, including the purchase of an existing campus in the Culver City submarket of Los Angeles and a land site in the East Village submarket of downtown San Diego for a combined total purchase price of approximately $226 million.
Both properties are located in vibrant urban neighborhoods with strong public transit options and rapidly developing infrastructure and amenities that are attracting both employers and residents. The two properties also provide for development or redevelopment opportunity over time.
Culver City Acquisition. In October, KRC paid $186 million for the 158,000 square-foot, 100% leased Blackwelder office campus situated on a 6.9 acre site at 3101-3243 La Cienega Blvd. The campus consists of 19 one and two-story buildings leased to creative tenants with an average in-place lease term of 39 months. In-place rents are approximately 35% below market rental rates. The Company intends to significantly increase the project’s square footage through the redevelopment of the campus over time.
In recent years, Culver City has become a magnet for the area’s creative industries and their employees. Major media content producers in the area now include Amazon, Apple, HBO and Sony Pictures. Class A office space in Culver City has experienced rapid rental rate growth in the past three years and vacancy rates are now at frictional levels.
The site is in close proximity to the Hayden Track and downtown Culver City. It also offers multiple transit options, including access to public transportation. The Metro Expo Line is about a 5-minute walk from Blackwelder and provides for a 20-minute ride to Santa Monica and a 25-minute ride to downtown Los Angeles. The site offers easy access to Interstates 405 and 10 as well as Los Angeles International Airport and Burbank Airport. Further, Blackwelder sits amid a range of new commercial, retail and residential development, including The Cumulus project, which is under construction and is scheduled to deliver in 2021. The Cumulus project encompasses 1,200 residential units, including a 30-story residential tower, 100,000 square feet of retail space and a one-acre public park.
In August, KRC paid $40 million to acquire a fully-entitled 2.3-acre land site, a full city block at 1335 Broadway and an adjacent partial city block at 901 Park Boulevard, in the East Village submarket of downtown San Diego. The site offers flexible zoning for the development of a mixed-use project. The company envisions a state-of-the-art development project reflective of the neighborhood’s urban, mixed-use design character, which may include rooftop decks and balconies, street-level retail and ground level open space.
The neighborhood has increasingly been attractive to the city’s burgeoning Millennial population. Over the past five years, approximately 4,500 new residential units have been delivered in the area with another 3,000 units under construction and 2,500 units approved or in planning review. Retail amenities and cultural institutions, including Petco Park, the new San Diego Central Library, and UCSD’s new East Village extension campus, have followed. Employers, attracted by the young, well-educated workforce, are now boosting demand for modern office space. The site also offers convenient access to public transportation options, including Amtrak and the MTS trolley station, as well as major freeways, including Interstate 5 and SR 163 and 94.
The acquisition also includes three existing buildings leased to the prior owner through mid-2021.
“We continue to evaluate new value-add opportunities in our markets that make strategic sense,” said John Kilroy, KRC’s chairman and chief executive officer. “We are excited to add these two terrific projects to our portfolio. They offer us significant upside through development and redevelopment, and in the case of the Culver City campus provide near-term earnings growth through rents that are well below market.