KBS Real Estate Investment Trust III Inc., a publicly registered non-traded REIT, has sold Hardware Apartments, a 453-unit, Class A apartment community located in downtown Salt Lake City, to Oakmont Properties in an off-market transaction.
According to a filing with the Securities and Exchange Commission, the sale price of the 464,000-square-foot property was $178 million, before third-party closing costs, credits and the disposition fee paid to the REIT’s advisor. The purchase was paid in a combination of approximately $27.8 million in cash and approximately $150.2 million in seller financing provided by a REIT subsidiary.
KBS said that it partnered with local developer SALT Development on the project and began ground-up construction in mid-2016 with the first phase of 267 units – Hardware West – completed in June 2018. The property sale concluded shortly after the completion of Hardware East, which comprises the remaining 186 units of the community.
According to the SEC filing, KBS REIT III and its development partner formed a joint venture to develop Hardware Village, with the REIT owning a 99.24 percent equity interest. The company partially funded its portion of the joint venture by contributing land from an existing REIT property valued at $13.5 million with a historical cost basis of $4.2 million. At March 31, 2020, the cost basis of Hardware Village, including the cost basis of the land and excluding accumulated depreciation, was $128.3 million. The project was primarily funded with capital contributions from the REIT and proceeds from a loan facility with an unaffiliated lender, which was paid off in September 2019.
“We are very strategic about when and where we do ground-up construction but being active investors for well over a decade in the market we thought this would be a successful venture…,” said Rod Richerson, KBS regional president for the Western United States. “Considering how hard it is to close deals during the current economic environment this sale was a major accomplishment but we worked diligently with the buyer over the last couple of months to see it through. We hit a particular challenge when they lost their lender at the last moment so KBS provided short-term market rate seller financing to help Oakmont Properties complete the transaction.”
Hardware Apartments is situated in Hardware Village adjacent to the historic Salt Lake Hardware Building, which is also part of the KBS portfolio.
The property includes penthouses, lofts, studios, one- and two-bedroom apartments, townhomes and brownstone row houses. Community amenities include a fitness center, yoga room, and rooftop lounge with an infinity pool.
Hardware Apartments is located near the TRAX light rail, Trolley Square and Liberty Park, and is connected to major thoroughfares, employment centers, arts and entertainment in the Salt Lake City market. The property is within walking distance of restaurants, shops and retail stores.
KBS REIT III’s initial offering commenced in October 2010 and closed in July 2015 after raising approximately $1.7 billion. The REIT’s $2 billion property portfolio consists of 18 office properties and one mixed use office/retail property.