A commingled fund managed by Kennedy Wilson acquired 661,000 square feet of office, industrial and data center space in the Denver market from two owners for $116 million.
The acquisitions by Kennedy Wilson Fund VI included Arapahoe Business Park in Centennial, 345 Inverness Drive South in Englewood and the Raytheon campus in Aurora. They consist of 12 buildings built between 1997 and 2001 and house investment-grade tenants including Santander, Comcast, Honda, Honeywell and Caterpillar.
The portfolio is 90% occupied.
“This acquisition represented an excellent opportunity to acquire a high-quality commercial portfolio with a strong investment-grade tenant base at a discount to replacement cost,” said Nick Colonna, Kennedy Wilson’s president of commercial investments and fund management. “The portfolio, along with our recent commercial campus acquisition in the Seattle area, are both well-suited to benefit from our Fund VI strategy that leverages our expertise in asset management to enhance existing cash flow while being defensive with our repositioning initiatives.”
There are no near-term lease expirations across the three properties, according to Colonna.
“Following the acquisition of the commercial portfolio, we are focused on operating all three properties at the highest level and enhancing the tenant experience by leveraging our asset management expertise,” Colonna said. “We are also working to lease up the significant vacancy at Arapahoe Business Park, which has already drawn interest from traditional office users as well as tenants in need of flex/industrial space.”
Arapahoe Business Park is a 309,445-sf property on East Arapahoe Road in Centennial. Kennedy Wilson Fund VI bought that property, along with the 175,287-sf 345 Inverness Drive South, from Griffin Partners. Tritower Financial Group sold the Raytheon campus, which consists of two buildings and received a number of offers.
“The single-tenant space has been particularly strong. We had a really good, competitive offering,” said John Jugl, Newmark Knight Frank vice chairman, Western Regional Capital Markets.
“This had seven years of lease term, so it was shorter lease term,” commented Jugl, who represented Tritower. “What we’re seeing is many of the defense contractors are going longer on leases right now. There seems to be more certainty in that the Buckley Air Force Base is an extraordinarily important Air Force Base from a U.S. security standpoint,” he said.
Colonna said the portfolio acquisition “is great example of how Kennedy Wilson benefits from strong local relationships.”
“We were able to close on three properties simultaneously to secure lower financing based on the scale of the transaction, thereby creating value upon our acquisition of the portfolio,” he said.
The acquisition, along with the purchase of the 269,000-sf Canyon Park East commercial campus in Bothell, Washington, come on the heels of the close of fundraising for Fund VI, which exceeded its target by securing $775 million of capital commitments, according Kennedy Wilson. The fund targets value-add real estate opportunities in high-growth markets across the Western United States and focuses on underperforming real estate that should benefit from a significant repositioning or renovation through Kennedy Wilson’s asset management program.
Kennedy Wilson has an 11% interest in Fund VI, which has a current portfolio of 12 multifamily, office, retail and other commercial assets with an aggregate purchase price of $1.1 billion. Fund VI has deployed $386 million of equity to date in markets including San Jose and Los Angeles, California; Salt Lake City; and the Seattle region.
Kennedy Wilson Fund VI owns two other properties in the Denver area: the Stone Cliff Apartments in Aurora and 303 E. 17th Ave., a Class A office building in Uptown Denver.