LOS ANGELES—Kilroy Realty is disposing of ten West Coast office assets totaling $309.2 million. The disposal is part of the company's capital recycling strategy in which it disposes of properties and uses the proceeds to fund its office development and acquisition objectives on the West Coast. The properties are located in San Diego and Washington.

Currently, Kilroy has completed escrow of four office properties totaling $146 million. The properties closed escrow in mid April. They included 10770 Wateridge Circle and 6200 and 6220 Greenwich Drive in San Diego, a total proceeds of $95 million, and 15050 NE 36th Street in Redmond, Washington, for $51.2 million in proceeds. The second tranche of properties will close escrow in the second quarter of 2015. Those properties total $163 million, and include 6260, 6290, 6310, 6340, and 6350 Sequence Drive and 4921 Directors Place in San Diego. All 10 properties have a total of one million square feet and an average occupancy of 84%.

According to John Kilroy, president, CEO and chairman of Kilroy Realty, the sales prices of the building illustrate the strong investor demand for office properties in the market. The latest Lee & Associates office report from 1Q15 shows that the San Diego market, where the majority of office properties were located, has an 11% vacancy, which has been declining for the last three quarters. Rental rates in the market are also on the rise, at $28.77 per square foot. For class-B assets alone, rental rates are also rising, up $1.96 per square foot, to $27.10 per square foot.

Kilroy's capital recycling strategy creates additional value for the company to continue its development projects in West Coast markets. Although there is no information about what the capital will be used for, the developer's current projects include Columbia Square, a creative office property at the historic CBS lot in Hollywood. Kilroy declined to comment on the transaction because half of the assets are still under escrow. We will update the story with more information from Kilroy once the final six assets close escrow in the summer.