KBS Sells Phoenix Office for $103M After Extensive Reno

KBS has sold Anchor Centre, a 333,014 square-foot class-A office property in Phoenix, to TerraCap for $103 million. KBS owned the property under its KBS REIT III and executed an aggressive capital improvement business plan.

KBS acquired the property in 2014, and invested what the company describes as a “multi-million dollar” capital improvement program. The firm upgraded the lobby; common areas and restrooms, and expanded and modernized the property’s amenity spaces. As a result of these improvements, Anchor Centre gained a local reputation as one of the most desirable office buildings in the submarket, according to Giovanni Cordoves, Western regional president for KBS. The property is Energy Star-rated with onsite dining, a deli, secured underground parking, a tenant lounge and game room, fitness center, conference facility, plaza area and outdoor patio.

The improvements also helped to drive strong leasing activity at the property—an even better sign of the asset’s progress. Even despite the pandemic, the property continued to attract tenants and retain existing tenants. In addition to the improvements, KBS also believes the parking ratio helped to attract tenants. The property has a parking garage with a parking ratio of 3.2/1,000, which allows employees can drive themselves to during the pandemic, thereby avoiding public transit. Anchor Center had a 93.2% occupancy rating at the time of the sale.

The Phoenix market has rebounded swiftly from the pandemic. The market has seen strong inward migration over the last several years, and the pandemic accelerated migration patterns. While Phoenix suffered job loss at the start of the pandemic, many of the lost jobs were recovered by the summer. As a result, the Phoenix office market vacancy remained below 15% throughout the pandemic, and class-A office performance is outpacing class-B performance.

Like KBS, other investors are planning renovations and ground-up office development through the pandemic. Developer George Oliver is redeveloping the Alexander, a class-A office development in the Phoenix suburb of Chandler. In a similar transaction, Lincoln Property Co. sold a its newly developed Grand2 property during the pandemic. The property was fully leased to DoorDash.

The JLL Capital Markets represented KBS, led by director Ben Geelan, senior managing director Michael Leggett and managing director Brian Ackerman.