Keppel KBS US REIT to acquire Seattle-based Westpark Portfolio for US$169.4 million

U.S. one-dollar currency notes; taken September 2018.U.S. one dollar bills.

Keppel KBS US REIT’s manager said on Monday that it entered a deal with KBS SOR Westpark Portfolio to acquire the Westpark Portfolio, a business campus with 21 freehold buildings in the Seattle-Tacoma-Bellevue metropolitan statistical area, for US$169.4 million.

The portfolio is the REIT’s third asset in the Seattle MSA, and is in the Eastside office market, where its other two assets in the region, The Plaza Buildings and Bellevue Technology Center, are located, it said in a filing to SGX before the market open on Monday. The portfolio is adjacent to downtown Redmond, Washington, it said.

The acquisition will be financed by proceeds from an equity fund raising, debt financing and internal cash resources, with the manager to determine the structure and timing of the equity fund raising, it said.

The equity fund raising could comprise a renounceable rights issue of new units, a non-renounceable preferential offering of new units of both a preferencial offering and a private placement of new units to institutional and other investors, it said.

Keppel Capital Investment Holdings and KBS SOR Properties, each of which holds around 6.97 percent of Keppel KBS US REIT has irrevocably undertaken that it will accept its total allotment of preferential offering units or rights issue units and will apply for excess units to maintain their percentage unitholding in the REIT, it said.

It noted the purchase price is a 4.8 percent discount to Cushman’s aggregate valuation of US$178.0 million and a 6.6 percent discount to JLL’s aggregate valuation of US$181.4 million.

“The area, which enjoys good accessibility and is supported by an excellent retail and amenity base, has seen positive leasing demand in
recent years due to limited new quality office inventory,” the filing said. “The presence of Microsoft Corporation and Nintendo of America’s headquarters in Redmond has also created a highly educated labour force and reinforced Redmond’s position as a key technology hub.”

The overall Eastside office market had an overall vacancy rate of 9.1 percent as of the first quarter of 2018 amid strong leasing activity and a relative lack of speculative construction, Keppel KBS US REIT’s filing said, citing Cushman & Wakefield Western data.

The Westpark Portfolio has a diversified tenant base, mainly in the technology and professional services sectors, and includes Oculus VR, it said. It has a committed occupancy of 97.7 percent and has a weighted average lease expiry of 4.3 years as of 30 June, it said.

The 21 buildings total 781,966 square feet over 41 acres, it said.

The portfolio comprises three clusters of buildings, Westpark Business Park, which has 14 two-story office buildings totalling 583,524 square feet, Redmond Center Court, which has two industrial buildings totalling 77,510 square feet, and Pacific Business and Technology Center, which has five office buildings totalling 120,932 square feet, it said.

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