LOS ANGELES--(BUSINESS WIRE)--Kilroy Realty Corporation (NYSE: KRC) today said it has signed a definitive agreement to sell The Exchange on 16th, the company’s 750,000 square-foot office property located at 1800 Owens Street in San Francisco’s Mission Bay neighborhood, for a purchase price of $1.08 billion or approximately $1,440 per square foot. Brokers have reported this as the highest per-square-foot sales price for a major property in the city’s commercial real estate market. The transaction is currently in escrow and expected to close at the end of March.
“This transaction demonstrates that quality assets in quality locations remain highly attractive to buyers and in this case generated a record price,” said John Kilroy, chairman and chief executive officer of KRC. “The return we achieved from development to disposition clearly highlights the value we have created through our development program. In addition, the strong price underscores the embedded value of our stabilized portfolio, which is well-leased, modern and highly sustainable.”
“This is a resounding sign that people are still excited to be a part of San Francisco and its future. I want to thank Kilroy Realty for their ongoing partnership and collaboration, and recognize them for how they continue to use their development expertise to move forward positive projects that help our economy grow and support the future of our City,” said London Breed, Mayor of the City and County of San Francisco.
KRC commenced development of The Exchange in late 2015 and signed a 15-year lease with Dropbox, Inc. (Nasdaq: DBX) for the entire office component of the property in 2017. At the time, it was the largest single Class A commercial lease transaction ever completed in San Francisco. The total development cost for the project was approximately $585 million or $780 per-square-foot.
The company will use the sale proceeds to fund development, for acquisitions, and for other general corporate purposes, including potentially paying down debt, repurchasing stock or paying a special dividend to the company’s common stockholders.
About Kilroy Realty Corporation. Kilroy Realty Corporation (NYSE: KRC, the “company”, “KRC”) is a leading West Coast landlord and developer, with a major presence in San Diego, Greater Los Angeles, the San Francisco Bay Area, and the Pacific Northwest. The company has earned global recognition for sustainability, building operations, innovation and design. As pioneers and innovators in the creation of a more sustainable real estate industry, the company’s approach to modern business environments helps drive creativity, productivity and employee retention for some of the world’s leading technology, entertainment, life science and business services companies.
KRC is a publicly traded real estate investment trust (“REIT”) and member of the S&P MidCap 400 Index with more than seven decades of experience developing, acquiring and managing office and mixed-use projects.
As of December 31, 2020, KRC’s stabilized portfolio totaled approximately 14.6 million square feet of primarily office and life science space that was 91.2% occupied and 94.3% leased. The company also had 808 residential units in Hollywood and San Diego, which had a quarterly average occupancy of 89.5% and 50.4%, respectively. In addition, KRC had six in-process development projects with an estimated total investment of $1.6 billion, totaling approximately 1.9 million square feet of office and life science space. The office and life science space was 89% leased.
A Leader in Sustainability and Commitment to Corporate Social Responsibility
KRC is listed on the Dow Jones Sustainability World Index and has been recognized by industry organizations around the world. KRC’s stabilized portfolio was 68% LEED certified and 39% Fitwel certified, the highest of any non-government organization, as of December 31, 2020.
The company has been recognized by GRESB, the Global Real Estate Sustainability Benchmark, as the listed sustainability leader in the Americas for six of the last seven years. Other honors have included the National Association of Real Estate Investment Trust’s (NAREIT) Leader in the Light award for six consecutive years and ENERGY STAR Partner of the Year for seven years as well as ENERGY STAR’s highest honor of Sustained Excellence, for the past five years.
A big part of the company’s foundation is its commitment to enhancing employee growth, satisfaction and wellness while maintaining a diverse and thriving culture. For the second year in a row, the company has been named to Bloomberg’s Gender Equality Index—recognizing companies committed to supporting gender equality through policy development, representation, and transparency.
More information is available at http://www.kilroyrealty.com.
Forward-Looking Statements. This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are based on our current expectations, beliefs and assumptions, and are not guarantees of future performance. Forward-looking statements are inherently subject to uncertainties, risks, changes in circumstances, trends and factors that are difficult to predict, many of which are outside of our control. Accordingly, actual performance, results and events may vary materially from those indicated or implied in the forward-looking statements, and you should not rely on the forward-looking statements as predictions of future performance, results or events. Numerous factors could cause actual future performance, results and events to differ materially from those indicated in the forward-looking statements, including, among others: global market and general economic conditions and their effect on our liquidity and financial conditions and those of our tenants; adverse economic or real estate conditions generally, and specifically, in the States of California and Washington; risks associated with our investment in real estate assets, which are illiquid, and with trends in the real estate industry; defaults on or non-renewal of leases by tenants; any significant downturn in tenants’ businesses; our ability to re-lease property at or above current market rates; costs to comply with government regulations, including environmental remediation; the availability of cash for distribution and debt service and exposure to risk of default under debt obligations; increases in interest rates and our ability to manage interest rate exposure; the availability of financing on attractive terms or at all, which may adversely impact our future interest expense and our ability to pursue development, redevelopment and acquisition opportunities and refinance existing debt; a decline in real estate asset valuations, which may limit our ability to dispose of assets at attractive prices or obtain or maintain debt financing, and which may result in write-offs or impairment charges; significant competition, which may decrease the occupancy and rental rates of properties; potential losses that may not be covered by insurance; the ability to successfully complete acquisitions and dispositions on announced terms; the ability to successfully operate acquired, developed and redeveloped properties; the ability to successfully complete development and redevelopment projects on schedule and within budgeted amounts; delays or refusals in obtaining all necessary zoning, land use and other required entitlements, governmental permits and authorizations for our development and redevelopment properties; increases in anticipated capital expenditures, tenant improvement and/or leasing costs; defaults on leases for land on which some of our properties are located; adverse changes to, or enactment or implementations of, tax laws or other applicable laws, regulations or legislation, as well as business and consumer reactions to such changes; risks associated with joint venture investments, including our lack of sole decision-making authority, our reliance on co-venturers’ financial condition and disputes between us and our co-venturers; environmental uncertainties and risks related to natural disasters; our ability to maintain our status as a REIT; and uncertainties regarding the impact of the COVID-19 pandemic, and restrictions intended to prevent its spread, on our business and the economy generally. These factors are not exhaustive and additional factors could adversely affect our business and financial performance. For a discussion of additional factors that could materially adversely affect our business and financial performance, see the factors included under the caption “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2020 and our other filings with the Securities and Exchange Commission. All forward-looking statements are based on currently available information and speak only as of the dates on which they are made. We assume no obligation to update any forward-looking statement made in this press release that becomes untrue because of subsequent events, new information or otherwise, except to the extent we are required to do so in connection with our ongoing requirements under federal securities laws.