News
PENINSULA KILROY, PART I
March 7, 2012
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| Kilroy Realty Corp acquired Menlo Corporate Center, seven buildings totaling 374k SF in Menlo Park, for $162.2M. This week we spoke with Northern California SVP Mike Sanford, who tells us this is Kilroy’s first acquisition on the San Francisco Peninsula. (But not likely the last, given strong fundamentals in the Silicon Valley and Peninsula office markets.) The property was 79% occupied with a couple of pending deals about to be signed that would take it to the low-80s and beyond. A number of existing leases are below market, and the opportunity to re-lease them “into an improving market is pretty critical to us.” |
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| Menlo Corporate Center (4100-4700 Bohannon Dr) boasts freeway visibility along the 101 and is home to a diverse group, including the Lucile Packard Children's Hospital at Stanford, E*Trade, and Allstate Insurance. Mike says Menlo Park is a supply constrained submarket in a city that doesn’t promote a lot of new development, and it feeds off the Palo Alto market, which right now has very little vacancy and high rents. “You expect to see the markets adjacent to Palo Alto improve, and we’re seeing that.” With this latest deal, Kilroy has acquired eight office projects totaling 2.6M SF ($877M in investment) in the San Francisco Bay Area since 2010. |
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| The previous owner got about two-thirds of the way through a renovation plan, including a signature fountain, before the real estate downturn hit. (The hard part was getting the water to stay 2/3 of the way up when renovation stopped.) Mike says that Kilroy saw an opportunity to complete the renovation and get vacant spaces market-ready for leasing. They’ll continue to create an identity for the building entrances and a better connection from a vehicular and pedestrian standpoint to each of the buildings. Mike says it also wants to redo some of the plazas and landscaping, improve the signage, and enhance the common area amenities, which could include some outdoor recreational and gathering spaces. |
