KBS FINDS SUCCESS WITH JV DEVELOPMENTS


Marc DeLuca

KBS is perhaps one of the most revered real estate investors today. Since its inception in 1992, KBS-affiliated companies have completed transactional activity in excess of $33 billion, amassing a current portfolio of 42 million square feet spanning 1,620 properties in many of the top investment markets in the U.S. Capitalizing on its market knowledge, savvy business practices and exceptional networking relationships, the company recently has found opportunities with joint-venture developments in key markets showing strong economic fundamentals.

Low vacancy rates, rent growth, improving economics and an expanding workforce has created strong office and multifamily demand across the country. And while development is not a regular selection on the KBS menu, it has discovered a unique opportunity to create quality assets in high demand micro markets where the cost of borrowing money and changing banking laws have kept many developers on the sidelines.

KBS’ reputation is bolstered by its financial acumen and ability to initiate and execute a deal swiftly and seamlessly, and also bringing the right lending partners into a project. It is no surprise that the company has caught the attention of developers looking for a well-respected equity partner to take on sophisticated projects. But KBS brings more than just financing to the table. It brings expertise. Backed by 25 years of operating experience and an experienced underwriting team, KBS has valuable insights into tenant motivators and amenity compositions that make each project uniquely competitive. KBS helps blueprint various aspects of the building’s design, aesthetics, amenities and functionality to maximize its potential and mitigate risk.

KBS currently has seven developments on its roster, comprising a 50/50 breakdown of office and multifamily. Some are ground-up developments, while others are adaptive reuse. Earlier this year, KBS and Shea Properties announced the development of Village Center Station II in Greenwood Village, Colo. The 330,000-square-foot building is being developed for Charter Communications, the second largest cable provider in the U.S. On-site will be 9,000 square feet of café dining and a 534 car parking structure as well. The property is already 100% pre-leased.

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In Raleigh, N.C., KBS has teamed up with Kane Realty Corporation on Park Central Apartments, which will feature 288,672 square feet of mixed-use residential and retail space. Currently under development, the 16-story high-rise will consist of 286 residential units and a multi-level parking deck.  Anticipated completion is September 2017.

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KBS’ most impressive adaptive reuse development is the historic Meier & Frank Building, one of downtown Portland’s most notable buildings. KBS is redeveloping the former Macy’s Department Store (floors 1-5) into mixed-use space encompassing retail and creative office space. Floors 6-16 of the property are home to the Nines Hotel. The project is on pace to wrap up in the first quarter of 2018.

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Like the properties it acquires, KBS looks at its development projects as a marathon—not a sprint. It’s in it for the long haul, but have the flexibility to alter that strategy if necessary. Office developments typically take 18-20 months to reach stabilization, while multifamily takes 18-24 months.

The U.S. economy has not reached the end of its current growth cycle and should continue to grow the rest of 2017 and well-into 2018. KBS will continue to keep a watchful eye for development opportunities ripe for the picking to help satiate demand for commercial real estate.

 

KBS Developments at a Glance: 

Midtown Plaza, Raleigh, North Carolina
New construction
Office, 329,214 square feet
Anticipated completion: 2017

Park Central Apartments, Raleigh, North Carolina
New construction
Multifamily and retail, 288,672 square feet
Anticipated completion: 2017

Bank of America Tower, Raleigh, North Carolina
New construction
Office, 300,000 square feet
Anticipated completion: 2017

Hardware Village Apartments, Salt Lake City, Utah
466 apartment homes
Anticipated completion: 2018

Meier & Frank Building, Portland, Oregon
Historical adaptive reuse
Office and retail, 208, 520 square feet
Anticipated completion: 2018

Village Center Station II, Denver, Colorado
New construction
Office, 330,000 square feet
Anticipated completion: 2018

 

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Marc DeLuca is Regional President overseeing the Eastern U.S. As regional president for KBS, Mr. DeLuca is responsible for all acquisitions, dispositions and asset management activities in the Northeast, Mid-Atlantic, Southeast and Ohio. Mr. DeLuca is also chairman of the KBS Investment Committee that meets regularly to review and approve all new investments for the firm.