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