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Press Room Release

Kilroy Realty Corporation Closes $300 Million Deal to Acquire Principal Assets of San Diego-Based Allen Group

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Contact: FOR RELEASE:
Richard E. Moran Jr Tyler H. Rose
Executive Vice President Senior Vice President
and Chief Financial Officer and Treasurer
(310) 563-5533 (310) 563-5531

LOS ANGELES, November 7, 1997 - Kilroy Realty Corporation (NYSE: KRC) today announced the completion of its previously reported agreement to acquire the principal assets of The Allen Group, a San Diego-based real estate and investment company. In a multi-phase transaction valued at more than $300 million, the company has purchased or agreed to purchase in the future more than 1.7 million square feet of office and industrial space, along with an office development pipeline of approximately 750,000 square feet strategically located in Southern California's rapidly expanding San Diego County region. "This is an excellent strategic move and a terrific real estate deal for Kilroy Realty," said company president John B. Kilroy, Jr. "Acquiring both real estate assets and substantial management talent from The Allen Group gives us an unrivaled leadership position in San Diego County, one of the fastest growing commercial real estate markets in California," he said.

Under terms of the purchase agreement, Kilroy has immediately acquired eight office and industrial properties totaling 907,000 square feet of space representing a total investment of $79.6 million. All eight properties - located in San Diego and Stockton, California and Las Vegas, Nevada - are 100% leased.

In a second phase of the transaction, Kilroy will purchase an additional four properties currently under construction, totaling 465,000 square feet of space, as each property is completed and occupied. All four of these properties - located in San Diego and Reno, Nevada - are 100% pre-leased, and all are expected to be completed by mid-year 1998.

Phase three of the transaction covers three office properties and one industrial property, totaling 358,000 square feet of space. Kilroy has agreed to purchase each of the four properties - located in San Diego and Redwood Shores, California and Las Vegas, Nevada - when each achieves a pre-determined occupancy level. These acquisitions are expected to be completed by year-end 1998. A fourth phase of the transaction includes a 750,000-square-foot development pipeline consisting of two planned office projects to be located in key submarkets of San Diego County on approximately 50 acres of land owned by The Allen Group. Kilroy has agreed to purchase a 50% managing interest in the two projects upon completion of all necessary entitlements and infrastructure, and will manage the development of both. The company also has acquired an option to buy out The Allen Group's remaining interest in both properties, upon completion, at 96% of fair market value. The two projects, located in San Diego, are expected to be started in 1998.

Richard S. Allen, managing partner of The Allen Group, has been elected to Kilroy's board of directors. In addition, Steven L. Black and T. Patrick Smith, former partners and senior executives with The Allen Group, have joined Kilroy as executive vice presidents and will be part of the senior management team responsible for Kilroy's overall development program.

Kilroy is financing the acquisition with a combination of cash, assumed debt and the issuance, over time, of up to approximately four million limited partnership units in Kilroy Realty, L.P. The units will be issued to The Allen Group's owners, including the Allen family, senior management and others. In the first phase of the transaction, $15.3 million of limited partnership units were issued.

Kilroy Realty Corporation owns, operates and develops office and industrial properties, primarily in California. At September 30, 1997, the company owned 3.1 million square feet of commercial office space and 3.8 million square feet of industrial space.

Some of the information presented in this release is forward-looking in nature. Although the information is based on the company's current best judgment, actual results could vary from expectations stated here. Numerous factors will affect Kilroy's actual results, some of which are beyond the company's control. These include the timing and strength of regional economic growth, the strength of commercial and industrial real estate markets, competitive market conditions, future interest rate levels and capital market conditions. For further information, please see Kilroy's Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q.

 

Kilroy Realty Acquisition of the Allen Group Assets

Property Contribution Schedule

 

 

Product

Square

%

Completed Buildings

Type

Completion

Feet

Leased

Location

-To be acquired at initial closing

-$79.6 million acquisition cost

Intuit

Office

1996

141,000

100%

San Diego

Arrowhead

Office

1997

93,000

100%

San Diego

Kfaft

Industrial

1996

165,000

100%

Stockton, CA

ValPak

Industrial

1993

103,000

100%

Las Vegas

Walmart

Industrial

1995

107,000

100%

Las Vegas

FFF Enterprises

Industrial

1997

78,000

100%

San Diego

Industrial Computer Source

Office

1997

130,000

100%

San Diego

Applied Micro Circuits Corp.

Office

1997

90,000


100%

San Diego

907,000

 

Product

Estimated

Square

%

Location

Buildings Under Construction

Type

Acquisition Date

Feet

Pre-leased

-To be acquired at completion of

construction

-$60 million estiated acquisition cost

Memec

Industrial

January 1998

73,000

100%

Reno

ComStream

Office

February 1998

200,000

100%

San Diego

LPL Holding

Office

September 1998

126,000

100%

San Diego

FedEx San Rafeal

Industrial

May 1998

66,000


100%

San Rafael, CA

465,000

 

To Be Leased and

Product

Estimated

Square

%

Location

Development Properties

Type

Acquisition Date

Feet

Leased

-To be acquired upon completion

of construction and lease-up

-$60 million estimated acquisition cost

Carmel Valley

Office

2nd Quarter 1998

116,000

52%

San Diego

Wateridge

Office

4th Quarter 1998

128,000

0%

San Diego

Pilot Commerce Center

Industrial

2nd Quarter 1998

80,000

28%

Las Vegas

Redwood Shores

Office

4th Quarter 1998

34,000


0%

Redwood City, CA

358,000

 

Estimated

San Diego

Product

Commencement

Projected

Location

Land Development Projects

Type

of Construction

Net Acreage

Square Feet

-Over $100 million investment

from 1998 to 2000

Kilroy Research Park (1)

Office

4th Quarter 1998

30

440,000

San Diego

Kilroy Del Mar Center (1)

Office

4th Quarter 1998

20

315,000

San Diego