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LBA Nears Sale Of Industrial for $1.5B

Irvine-based real estate investor LBA Realty is close to making its largest deal in more than a decade with a blockbuster sale of a large portion of its industrial portfolio.

The privately held company—one of Orange County’s most active commercial property investors in recent years—is nearing a deal to sell a 12-million-square-foot portfolio of large industrial properties, mostly along the West Coast.

New York-based private-equity giant Blackstone Group is under contract to buy the buildings, and a deal should be completed within the next two months, sources familiar with the transaction tell the Business Journal.

Blackstone will pay about $1.5 billion for the portfolio, according to sources familiar with the impending deal, which was first reported by the Wall Street Journal last week.

That works out to a price of about $125 per square foot.

The deal would be one of the biggest industrial portfolio sales in the U.S. this year by price and square footage, if not the largest.

The nearly 50 warehouse and distribution facilities were put up for sale early this summer. Eastdil Secured has the listing for the property, according to local real estate sources.

The buildings are about 95% leased, the sources said.

The properties represent “a portion” of LBA’s industrial holdings, according to local sources. The company’s website says it operates an industrial portfolio of more than 20 million square feet throughout the western United States.

The properties being sold to Blackstone are primarily in California and the Pacific Northwest, with a few buildings in other markets.

Local Portfolio

LBA owns more than two dozen industrial properties in Southern California, including about 1.5 million square feet in Orange County, according to the company’s website.

“A handful” of its OC buildings will trade hands in the deal with Blackstone, sources said. Specific data on the individual buildings being sold hasn’t been disclosed.

LBA is expected to retain a minority stake in the portfolio being sold and would retain some management duties for the properties, according to people familiar with the transaction.

Much of LBA’s OC industrial portfolio was acquired in 2012, when it bought the local holdings of Los Angeles-based Kilroy Realty Corp. It has since shed some of those properties—a mix of warehouses, business parks and light industrial buildings—in individual sales.

A large portion of the portfolio is in Anaheim, Santa Ana and Tustin, while its largest industrial property in OC is a 309,000-square-foot facility in Foothill Ranch that’s used by Guthy Renker Fulfillment Services and others.

The Foothill Ranch property—which sources said isn’t part of the Blackstone deal—is the only industrial building in OC that cracks the top 30 of LBA’s largest warehouse and distribution buildings by square footage, according to the company’s website.

Those 30 buildings total roughly 12 million square feet.

Savvy Buyer, Seller

LBA also owns a number of area offices and mixed-use properties that aren’t part of the transaction with Blackstone; it is best known locally for its ownership of the bulk of the 105-acre Park Place office campus near John Wayne Airport in Irvine.

LBA’s purchase of the then-financially distressed Park Place campus in a series of transactions in 2009 and 2010 is widely seen as one of the most profitable commercial real estate transactions in OC since the recession.

Last year, Principal Real Estate Investors, a Des Moines, Iowa-based institutional investor, paid nearly $370 million for a 45% interest in LBA’s office and retail holdings at Park Place, which total nearly 2 million square feet, according to CoStar Group Inc. records.

That’s believed to be more than twice what LBA paid for the entire campus.

LBA also has bought and sold a number of other area properties in the past six or so years in a series of profitable deals, giving it a reputation as one of OC’s savvier real estate investors.

The same description could be applied nationally to Blackstone, the country’s largest private-equity investor in real estate.

The deal is the first industrial buy for Blackstone since it sold its IndCor Properties division last year for $8.1 billion. It bought most of the nearly 20 million square feet of properties for that Chicago-based business on the cheap after the recession.

Other real estate investments the company has made over the past decade include the purchase of office investor Equity Office and the $26 billion takeover of the Hilton hotels chain.

While many of Blackstone’s real estate holdings were purchased with its opportunity funds, used for shorter-term, highly leveraged investments expected to bring strong returns, the LBA deal would likely be done for one of its “core-plus” funds, which invests in more stable properties for longer periods, the Wall Street Journal reported last week.

The buy of the LBA portfolio comes amid changes in the way big companies are using industrial space, thanks to changes in e-commerce business strategies (see related story on Amazon Prime Now, page 1).

“As Amazon and others began offering faster delivery, they began looking for so-called in-fill properties closer to population centers that were partly designed to process individual packages rather than pallets of goods bound for stores,” the Wall Street Journal noted in its story on the impending transaction.

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Mark Mueller
Mark Mueller
Mark is the Editor-in-Chief of the Orange County Business Journal, one of the premier regional business newspapers in the country. He’s the fifth person to hold the editor’s position in the paper’s long history. He oversees a staff of about 15 people. The OCBJ is considered a must-read for area business executives. The print edition of the paper is the primary source of local news for most of the Business Journal’s subscribers, which includes most of OC’s major corporate and community players. Mark’s been with the paper since 2005, and long served as the real estate reporter for the paper, breaking hundreds of commercial and residential real estate stories. He took on the editor’s position in 2018.
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