TA Southern California investor has purchased 1.5 million square feet in Yolo County for the lowest price paid for industrial space in a long time — some say as much as two decades.
The large size and low price of the deal mark a shift in the industrial market, as the financial gap begins to close between buyers and sellers.
Amir Development Co., a family-owned company whose industrial portfolio totals 9 million square feet, has picked up three Woodland buildings and two West Sacramento buildings for nearly $27 million, or about $18 per square foot, real estate sources estimated.
An Amir Development executive would not discuss the amount the company paid, but sources said it was less than half the amount the properties would have fetched before the recession.
“The gap between buyers and sellers is closing,” said Matt Cologna, an industrial broker with Grubb & Ellis Co. “The market’s coming in line where it’s making sense for some investors to jump in.”
The seller was ING Clarion, the U.S. investment management and development arm of global real estate investment company ING Real Estate. ING Clarion bought the industrial buildings several years ago as part of a larger purchase in the Western states, and was ready to unload it, sources said. A spokeswoman with ING Clarion declined comment on the sale to Amir Development.
The purchase doubles Amir Development’s industrial portfolio in the Sacramento region, bringing the company up to 2.7 million square feet in the four-county area, said Keenan Wolens, an Amir Development executive vice president.
The Beverly Hills company entered this market more than a dozen years ago. Its largest single building locally is the former Hewlett-Packard Co. warehouse in Roseville that measures 770,000 square feet.
“We like it up there,” Wolens said. “Over the long term it’s going to do well.”
When the deal closed a few weeks ago, the five Yolo County buildings that Amir Development purchased had a collective 59 percent vacancy rate, factoring in short-term tenants or tenants that are about to leave, real estate sources said. The Woodland buildings, in particular, have higher vacancies.
But Amir Development already is starting to find tenants, Wolens said. The company just signed a tenant — which had used the space through a sublease — to occupy the 98,496-square-foot building at 1675 Overland Court in West Sacramento, he said.
“The market is definitely slow,” Wolens said. “We just plan to work it. We are here to make deals. We didn’t just buy there to sit on it.”
Amir Development also plans to hire a Sacramento-area broker to handle its leasing, he said.
Investors have been sitting on the sidelines because owners of industrial buildings haven’t offered low enough prices. The Amir purchase is a great example, sources said, of properties that were priced low enough for the buyer to make a return on its investment.
“Sellers are getting realistic, or they’re being forced into reality,” Cologna said.
Mark Demetre, an industrial broker with the Colliers International Central Valley Industrial Group, said he’s never seen such a low price in his 20-plus years in the industry. “We think it was a stellar deal for the Amir family,” he said, adding that the properties probably would have sold for $40 to $50 a square foot in better economic times.
At the low purchase price, Amir Development likely could still break even with very low rents and half-vacant buildings, according to some estimates.
And even with low demand for industrial buildings during the sour economy, Amir Development, Demetre said, has a good shot at leasing its space with the low rents it could offer.
Although the market is slow, the Amir Development purchase isn’t the only recent industrial deal. The Central Valley Industrial Group represented the Bob Lurie family, whose holdings once included the San Francisco Giants, in the sale of a 200,000-square-foot building at 1100 Tinker Road in Rocklin for $8.5 million, or $42.50 per square foot. The buyer, SierraSnowboard.com, was represented by Walter Smyth and Todd Sanfilippo of CB Richard Ellis.
(15 November 2009 – Sacramento Business Journal)