Kilroy Realty Corp. (KRC), a real estate investment trust (:REIT), has recently sold an entire portfolio of industrial assets and two small office properties spanning 3.7 million square feet to an unnamed seller. The asset sale was part of the long-term strategy of the company to divest its non-core industrial properties and instead concentrate on its core office segment.
The company has already sold 44 properties in two tranches to two institutional buyers for approximately $355 million. Kilroy expects to record $185 million as profit from the transaction in the fourth quarter of 2012. Moving forward, the company intends to invest the proceeds from the deal to acquire and develop high-quality office space primarily in the West Coast region.
Earlier in the month, Kilroy had also amended its existing unsecured credit facility to extend the debt maturity as well as reduce its interest burden. The modified credit facility with a borrowing capacity of $500 million is currently scheduled to mature in April 2017. All these strategic efforts were aimed to increase its liquidity and relieve its debt burden.
The amended credit facility bears an annual interest at LIBOR plus 1.45% and a facility fee of 30 basis points, as determined by the present credit ratings of the company. The existing credit facility had an interest rate of LIBOR plus 1.75% and a facility fee of 0.35%, representing a significant dip in the funded interest outflow. However, the other terms and conditions of the erstwhile credit facility were kept unchanged.
Kilroy owns, develops and manages a diverse portfolio of office, industrial and multi-purpose real estate properties primarily in the coastal regions of Los Angeles, Orange County, San Diego, greater Seattle and the San Francisco Bay Area. As of September 30, 2012, the company owned 12.7 million rentable square feet of office space.
Kilroy maintains an active multi-year development program focused on the economically dynamic locations characterized by strong long-term demand, limited supply, and high barriers to entry. As such, most of the properties of the company are concentrated in the coastal submarkets of Southern California that offer both a vibrant economic backdrop for businesses and a unique quality of life for their employees.
Currently, we have a Neutral recommendation and a Zacks #3 Rank for Kilroy that translates into a short-term Hold rating. We also have a Neutral recommendation and a Zacks #3 Rank for MPG Office Trust, Inc. (MPG), one of the competitors of Kilroy.
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