🚨Kilroy Realty acquired Maple Plaza, a 293,000-sf Class A Beverly Hills office, for $205 M (~$700/sf). The price is more than double Tishman Speyer’s 2005 basis, underscoring resilience in prime submarkets even as U.S. office values are down ~30% from 2019 peaks. With 25% vacancy and premium rents ($65–70/sf vs. ~$43/sf metro average), the REIT is betting on lease-up and tenant flight-to-quality. For CRE capital, the deal shows trophy assets remain liquid while commodity offices languish.
Maple Plaza Sale: $205 M (~$700/sf), 293,000 sf, 75% leased
Beverly Hills Vacancy: 18.6% Q3 2024 vs. ~25% L.A. metro
Beverly Hills Rents: $65–70/sf annually vs. ~$43/sf broader L.A
U.S. Office Vacancy: ~20.7% mid-2025 (record high)
Loan Performance. Trophy quality supports DSCR resilience; with 50% leverage, stabilized NOI could yield ~2.0× coverage. Value hinges on leasing the remaining 25% vacancy; without it, carry costs rise quickly.
Demand Dynamics. Entertainment, finance, and education tenants drive Beverly Hills demand. Concessions remain necessary, but flight-to-quality supports rent stickiness. Broader L.A. absorption is weak, isolating only prime submarkets.
Asset Strategies. Kilroy must invest $10–15 M in TI and amenity upgrades. Repositioning toward creative/medical use provides a hedge. Lease-up within 24 months is critical for hitting a 6–7% yield.
Capital Markets. Deal highlights a barbell market: lenders and buyers still back prime assets, while generic offices see distress pricing. Spreads for Beverly Hills-grade offices run ~200 bps over Treasurys, lower than metro averages.
Trophy assets still command premium pricing.
Beverly Hills/Westside outperform metro office averages.
Financing available for prime, institutionally owned buildings.
Commodity offices face liquidity and valuation stress.
🛠 Operator’s Lens
Refi. Prime Westside assets still refi smoothly; secure early, leverage institutional sponsorship.
Value-Add. Lease-up requires heavy TI budgets (~$80–100/sf); underwriting must reflect concession burn.
Development. Replacement cost economics remain prohibitive; adaptive reuse applies only to weaker stock.
Lender POV. Banks and life cos favor Beverly Hills-grade sponsorship; CMBS largely shut to generic offices.
Monitor Kilroy’s lease-up over 12–24 months as proof of submarket strength.
Expect more prime L.A. sales (Century City, Santa Monica) testing $600–700/sf benchmarks.
Wider office distress continues; bifurcation between trophy and commodity will sharpen.
Bloomberg; CoStar; MarketScreener; Cushman & Wakefield; CBRE.
