Kilroy Realty Corp. is expanding in the Austin office market with a big splash. The company has entered a definitive agreement to purchase the newly completed Indeed Tower in Austin’s CBD, for $580 million, in an off-market transaction. According to CommercialEdge, Trammell Crow Co. is the current owner of Indeed Tower, which it developed in a joint venture with Principal Real Estate Investors.
Eastdil Secured and Allen Matkins brokered the deal on behalf of Kilroy. Indeed Tower is currently 57 percent occupied.
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The deal is expected to close in the third quarter, marking one of the metro’s largest transactions this year, according to CommercialEdge data. After selling The Exchange in San Francisco for a record $1 billion, Kilroy will use the proceeds to expand in Austin, the company stated in a presentation to its shareholders.
Trammell Crow Co. started work on the 36-story tower in 2017 and finalized construction in May this year. According to CommercialEdge data, the developer received a $211 million construction loan, provided by JPMorgan Chase.
At 542 feet high, Indeed Tower is the fifth-tallest building in Austin and the metro’s tallest office tower, as well as the largest, totaling 730,000 square feet. The property features floorplates with an average size of 33,000 square feet and an outdoor deck space totaling 30,000 square feet. The tower includes 10,000 square feet of ground-floor retail, an 8,500-square-foot fitness center, 45 EV charging stations, a bicycle storage area and a parking ratio of 2.0 per 1,000 square feet. The developer is targeting LEED Platinum certification for the building.
The property is currently anchored by Indeed.com, a subsidiary of Japan-based Recruit Holdings, which occupies 42 percent of the space. The other two tenants are the Teacher Retirement System of Texas and Brown Advisory Group. The new owner expects to create more value through additional leases, while the tower will serve as its growth platform within the metro.
Indeed Tower occupies a full city block at the intersection of 6th and Colorado streets. In addition to the office tower, developers have also repositioned a 100-year-old post office building into a 25,000-square-foot retail/restaurant destination and added a private park of 20,000 square feet. The surrounding downtown area is home to a variety of restaurants, hotels and event venues, all within walking distance.
According to CommercialEdge data, the property is subject to a 95-year unsubordinated net ground lease held by the Board of Regents of the University of Texas System. As reported by Commercial Property Executive in 2018, the property was previously home to offices of the University of Texas System.
In the same presentation for investors, Kilroy Realty Corp. detailed its reasons for expanding to Austin. The metro represents a similar investment profile to the other cities where Kilroy is present, including Los Angeles, San Diego, San Francisco and Seattle. Over 80 percent of Kilroy’s top technology tenants have a presence in Austin and the city’s strong tech in-migration over the past years provides a steady flow of highly educated workers.
Further expansion plans
This month, Kilroy Realty Corp. is expected to close on two additional transactions. The company is in escrow to acquire a land site for $42 million in San Diego’s Little Italy neighborhood. It is adjacent to an existing development at 2100 Kettner Blvd., where Kilroy plans to build a 270,000-square-foot office.
In Bellevue, Wash., Kilroy will pay $47 million for the acquisition of an underlying ground lease for the 488,000-square-foot Key Center project. According to CommercialEdge data, the LEED Platinum building at 601 108th Ave. was acquired by Kilroy in 2011 from Beacon Capital Partners, for $217 million. The mid-rise tower is 81 percent occupied, with tenants including Facebook, KeyBank and SAP Concur, among others, CommercialEdge data shows.
Earlier this month, Kilroy also announced that construction started on its $940 million life sciences project in South San Francisco, the second phase of the 3 million-square-foot Kilroy Oyster Point.