KBS Real Estate Investment Trust II (KBS REIT II) recently sold a portfolio of four industrial properties for $105.7 million. The non-traded REIT originally purchased the portfolio, which is known as I-81 Industrial Portfolio, in February, 2011 for $92.9 million, including closing costs.
The aggregate sales price of I-81 Industrial Portfolio, net of concessions and credits, but excluding closing costs and expenses, was about $63 per square foot compared to an aggregate cost per square foot of approximately $56.
The portfolio consists of four properties totaling 1,644,480 rentable square feet and taking up 133.4 acres of land in Pennsylvania. The portfolio is located along the interstate 81 corridor in Pittston, Hazelton, and Jessup, PA. The area benefits from proximity to major East-West highways, bringing traffic to and from New York City, Boston, Pittsburg, Philadelphia, Washington, D.C., and Baltimore.
“The I-81 / I-78 corridor has become highly sought-after by investors,” commented Michael Hines from CBRE, who represented KBS in the sale along with his partners Brian Fiumara and Brad Ruppel. He continued, “This market has a low vacancy rate (8.4% for modern bulk) and tremendous leasing activity averaging 21.7MSF from 2011 to 2013, including a 41% year-over-year increase in 2013.”
One of the four buildings in the portfolio is a high-bay industrial building, consisting of 140,800 square feet. The other three buildings are bulk industrial and distribution buildings.
“The buildings in this portfolio were constructed in 2007 and 2008, offering high-quality, modern space for large corporations and third-party logistics providers,” said Shannon W. Hill, KBS Senior Vice President. “We believe that the quality of this portfolio and history of low vacancy rates made it an attractive investment for the buyer.”
In connection with the disposition of I-81 Industrial Portfolio, KBS REIT II repaid $56.2 million of the outstanding principal balance due under a portfolio mortgage loan, which was partially secured by I-81 Industrial Portfolio.
KBS REIT II sold nine properties between May and August of this year, allowing the California-based REIT to declare a special distribution in September 2014. Shareholders received special distributions in the aggregate amount of $858.6 million or $4.50 per share of common stock.
Investors may benefit from more property sales in the future if KBS REIT II continues providing liquidity in the form of dispositions. As of September 30, 2014, KBS REIT II had one office property classified as held for sale.