KBS REIT II Purchases National City Tower
- Dec 23, 2010
December 23, 2010
By Barbra Murray, Contributing Editor
The shopping spree continues for KBS Real Estate Investment Trust II Inc. with the purchase of National City Tower, a 723,300-square-foot office building in downtown Louisville, Ky. KBS acquired the premier property from Meridian Realty Investments L.L.C. in a $115 million transaction that marks the REIT’s Kentucky debut.
National City Tower, carrying the address of 101 South 5th Street in the Main Street Corridor, holds the distinction of being one of the most prestigious office locations in Louisville’s central business district. KBS REIT II relied on proceeds from an offering and a $69 million mortgage loan scheduled to mature in December 2015 to finance the acquisition.
Architectural firm Harrison & Abramovitz designed National City Tower, which made its debut in 1972 as the home of First National Bank. The 40-story building spans 2.6 acres and encompasses 689,500 square feet of office accommodations, 24,900 square feet of retail space and 8,900 square feet of storage space. Tenants include PNC Bank, Humana and law firms of Greenebaum Doll & McDonald and Dinsmore & Shohl L.L.P. The big names take up big space. Together, tenants large and small have left National City Tower with a 96 percent occupancy level, a status that is nothing to sneeze at considering the current condition of the city’s office market. Louisville’s average vacancy rate was 14.5 percent in the third quarter, according to a report by global commercial real estate services firm Studley, with Class A properties recording a vacancy rate of 12.6 percent.
Louisville is not a commercial real estate hotspot like Los Angeles or New York City, but the city’s central business district and National City Tower in particular have great appeal from KBS REIT II’s perspective. “We were attracted to a number of building-specific factors, including the high-quality nature of the property, its prime downtown location, and its historically strong rent roll and tenant appeal,” Bill Rogalla, KBS senior vice president and director of acquisitions for the Central Region, told CPE. “More specifically from a location standpoint, the property is ideally located to take advantage of downtown Louisville’s continued emergence as a business, leisure and visitor destination, thanks to a flurry of new retail and residential development, and especially the landmark KFC YUM! Center.”
KBS REIT II has had quite a busy year in terms of office property acquisitions, and its purchases have not exactly been small potatoes. The REIT snapped up the 561,700 square-foot Granite Tower in Denver in a $149 million deal this month and bought the 627,300 square-foot Union Bank Plaza office and retail complex in downtown Los Angeles for $208 million in September. And at the end of July, KBS REIT II completed its $655 million acquisition of the 1.3 million square-foot office tower at 300 North LaSalle in Chicago, marking one of the largest commercial real estate transactions of 2010 at that point. The list of transactions goes on and on and it appears the REIT is not losing any steam. “KBS is continually targeting prime commercial real estate assets in metropolitan markets across the country,” Rogalla said.