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.