Keppel-KBS US REIT Buys Seattle Business Campus for $169M

Keppel-KBS US REIT on Monday announced that has agreed to buy a 21 building business park in Washington state, picking up the commercial assets some 15 minutes’ drive from Microsoft’s home office in Seattle for $175.7 million including fees of $6.3 million.

“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,” Keppel-KBS US REIT CEO and CIO David Snyder said.

With the acquisition of the 778,472 square foot Westpark portfolio from KBS SOR, a REIT managed by Keppel’s partner in Keppel-KBS US REIT, the Singapore-listed trust is following its compatriots CapitaLand and Ascendas-Singbridge in expanding its property investments into the world’s biggest economy.

Buying a Seattle Business Home

Through the transaction with KBS SOR, Keppel-KBS US wins the rights to a 778,472 square foot business park composed of 21 buildings located in Redmond, Washington, less than one year after the trust listed on the Singapore exchange.

The complex some 16 miles east of Seattle includes fourteen two-storey office buildings covering 583,524 square feet in Westpark Business Park; five office buildings yielding 120,932 square feet in the Pacific Business and Technology Center; and Redmond Center Court with two industrial buildings that total 77,510 square feet.

The $169.4 million consideration compares to independent valuations of $178 million and $181.4 million from Cushman & Wakefield and JLL Valuation & Advisory respectively.

KBS SOR bought the Westpark portfolio from Toronto-based Bentall Kennedy in February 2016. According to the media report at that time, KBS paid $128 million for the portfolio, which was around 85 percent occupied at the time of sale.

KBS Fixes Up and Sells on to Singapore

Under the management of KBS, the Westpark Portfolio has undergone repositioning from an underutilized space to an amenities centre according to the US firm, including providing fitness areas, food truck service, and conference facilities. According to Keppel-KBS US REIT, the Westpark portfolio reports an occupancy rate of 97.7 percent and has an average lease expiry of 4.3 years.

The 102 tenants are mainly in the technology (34.8 percent of net leased area) and professional services (38.2 percent) sectors, including Facebook-backed US technology company Oculus VR, which specializes in virtual reality hardware and software products.

Apart from rising occupancy at the complex, Keppel-KBS US REIT’s new properties also benefited from Redmond’s position as a technology hub as the city houses the headquarters of Microsoft Corporation and Nintendo of America.

According to Snyder, Seattle is one of the strongest office markets in the United States, and the REIT is expected to benefit from steady rent growth of approximately 4 percent by 2020. His remarks were supported by Colliers US Office Market Outlook for Q1 2018, which found that office vacancies in the city remain below 10 percent during the first three months of 2018, while rents climbed by 3.9 percent year on year.

Keppel-KBS Builds Up its US Portfolio

Last October, Keppel Capital, which already managed three Singapore-listed REITs, partnered with California-based KBS Pacific Advisors to jointly establish a REIT to access to the US property market. Keppel-KBS US REIT composed of $820 million US office assets by the time it was approved to listed in the Singapore Exchange at the beginning of October last year.

With the acquisition of the Westpark complex, the REIT now has a total of 12 portfolios in the US, including class A and class B offices in Denver, Houston, Austin, Orlando, Atlanta, and Seattle.

Close to the Westpark business campus, the REIT also owns The Plaza Buildings (a pair of office buildings situated along one of the busiest corridors in the Bellevue central business district) and Bellevue Technology Center, a 330,508 square feet office complex a few blocks away from Microsoft’s global headquarters.

Singapore Real Estate Companies Buying in the US

Other than Keppel-KBS US REIT’s acquisition of the Westpark business park, Singaporean real estate companies have been queuing up to buy properties in the US since the beginning of September.

Last week, Southeast Asia’ largest developer, CapitaLand, purchased an $835 million portfolio of US multifamily properties from Starwood Capital, giving the government-backed firm a portfolio of apartments and townhouses in suburban satellite orbiting the metropolitan areas of Seattle, Portland, Greater Los Angeles and Denver.

CapitaLand’s multifamily deal came just one week after hometown rival Ascendas-Singbridge did its own deal with Barry Sternlicht’s Starwood Capital to purchase a set of 33 US office properties estimated to be worth $1 billion.