Kennedy Wilson Buys Bay Area Office Campus for $115M

The company acquired the seven-building campus in a 1031 exchange, funding the deal with proceeds from the sale of two multifamily communities.

Hamilton Landing. Image courtesy of Kennedy Wilson

Real estate investment firm Kennedy Wilson has acquired an office campus north of San Francisco for $115 million, funding the purchase through the sale of two multifamily communities elsewhere in California and Washington.

The 1031 exchange transaction involved the acquisition of Hamilton Landing, a seven-building, 406,000-square-foot office complex on a former Air Force base in Novato., Calif., roughly 25 miles north of downtown San Francisco. Kennedy Wilson invested $55 million of equity and took on a $60 million interest-only loan at a 4.34 percent fixed rate, maturing in 2025.

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ScanlanKemperBard Cos. (SKB) had acquired the Marin County asset from Barker Pacific Group in 2015 for $84 million, according to Yardi Matrix. The office property sits across 20 acres at 3, 4, 5, 6, 7, 9 and 10 Hamilton Landing. Barker Pacific developed the Class A office property by renovating a set of vacant airplane hangars built in the 1930s and decommissioned in the 1970s. The adaptive reuse project was completed between 2000 and 2008.

The property overlooks protected wetlands a half mile from the Novato Hamilton station of the Sonoma-Marin Area Rail Transit (SMART). Hamilton Station is 92 percent occupied with a weighted average lease term of 4.5 years. Rents currently stand at a more than 50 percent discount on rents in downtown San Francisco, according to a statement by the buyer.

Shedding apartment assets

As part of the like-kind exchange deal, defined by section 1031 of the IRS Code, Kennedy Wilson generated $63 million for the office acquisition by selling a 50 percent interest in two apartment properties totaling 695 units.

The company sold ShorePark, a 393-unit apartment community at 7952 Pocket Road in Sacramento, Calif., and Indigo Springs, a 302-unit property at 11101 SE 208th St. in Kent, Wash. Sequoia Equities bought up ShorePark, while Decron Properties acquired Indigo Springs. The assets were sold for a total of $176 million. Kennedy Wilson had managed to boost their net operating income by 95 percent over a 12-year average hold period.

The New York Stock Exchange-listed company received a $300 million strategic investment led by affiliates of Eldridge Industries last month. In September, a joint venture between Kennedy Wilson and Security Benefit Life Insurance Co. acquired Sunset North, a three-building office campus in Bellevue, Wash., for $227 million.

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