One of the most prominent industrial buildings in the area around John Wayne Airport, the 2323 Main St. building in Irvine, now has a for-lease sign up after years of turning away potential tenants.
If the federal government has its way, a for-sale sign could soon follow.
The U.S. Department of Justice is looking to seize ownership of 2323 Main, and alleges that the 260,850-square-foot facility was used by the property’s wealthy Chinese owners as part of a plot to smuggle aluminum into the U.S. and avoid paying hefty tariffs.
Large industrial facilities in Ontario, Fontana and Riverside were also part of the plot, where the aluminum pallets—much heavier than traditional pallets typically used for shipping—were brought into the country for the purpose of being melted for other uses, the DOJ alleges.
Nearly 2.2 million pallets of aluminum were illegally imported into the U.S. between 2011 and 2014, which helped Fontana-based Perfectus Aluminum Inc. evade about $1.5 billion in tariffs, according to the complaint.
A bulk of the so-called “bogus pallets” were “harbored and concealed” at four Southern California locations at different points over about the past six years, the complaint alleges.
The Business Journal first reported on the Irvine building’s apparent ties to the scheme in October after a line of freight trucks began queuing up to load or unload shipments of what appeared to be aluminum pallets.
Perfectus Aluminum, the Irvine warehouse, and the other three properties are alleged to have ownership ties to China Zhongwang Holdings Ltd., a large aluminum company controlled by one of China’s wealthiest people, Liu Zhongtian.
The government filed a civil forfeiture action on Sept. 14 against the ownership group of each of the four related industrial buildings, which total about two million square feet.
By property size, it’s one of the largest real estate forfeiture actions the DOJ has taken up in the region, according to Steven Welk, chief of the asset forfeiture section for the U.S. Attorney’s Office for the Central District of California, where the cases were filed.
Busy Corner
The property is at the intersection of Von Karman Avenue and Main Street about a mile from the airport and across the street from the Intersect office campus.
It’s owned by an entity listed in property records as Von Karman-Main Street LLC, which paid an undisclosed price for it in 2009.
The Business Journal first reported last year on the building’s reported ties to Zhongtian, whom Forbes estimates to have a $2.7 billion fortune.
The Wall Street Journal reported last year that Zhongtian-related affiliates, among other tariff-avoiding schemes, were hiding a reported 6% of the world’s aluminum in a Mexican desert. His firms denied the charges.
A potential government takeover of the Irvine building wouldn’t affect Zhongtian’s bottom line too much, but it would be a notable transaction among area industrial properties.
At the peak of the last real estate market cycle a decade ago, the property was valued at nearly $40 million and was at one time being considered by an affiliate of the current ownership group for redevelopment. That plan never moved ahead.
The Von Karman-Main Street LLC group has a month to respond to the complaint, according to Welk.
The defendant had not responded to the complaint in court filings as of last week.
Sept. ’16 Activity
The DOJ’s complaint is the latest chapter on the industrial building—the headquarters of athletic shoemaker American Sporting Goods Corp. more than a decade ago—which has had its share of intrigue since its 2009 sale.
A few company signs were posted at the front of the property shortly after its last sale, giving it the outward appearance of being occupied.
Numerous brokers familiar with the property said the 260,850-square-foot building had in fact sat largely unoccupied since the sale, despite its prominent location at one of Irvine’s busiest intersections and a remarkably tight local market for industrial space.
That wasn’t the case last September, when the Business Journal reported on a frenzied amount of freight traffic taking place at the building over a period of a few days, with lines of trucks spilling out to Main Street.
A bulk of the trucks bore the name of Wan Hai Lines, a Taiwan-based shipping firm with a presence at the Port of Long Beach.
Photos taken in mid-September showed the building to be partially full with what appeared to be aluminum pallets and aluminum rods.
The Business Journal cited sources at the time that believed the aluminum was being delivered mid-month to the building. This month’s federal complaint maintains the warehouse was actually being emptied around then.
As of February, the property was still about 80% to 90% filled with the aluminum pallets stacked 16 feet high, according to the DOJ complaint, which notes that the building has since been under surveillance by federal agents.
The property’s owner has employed a full-time security guard at the site for the better part of the year, a rarity among area industrial buildings.
It’s now largely empty, and in a first, a bulk of the facility is being offered for lease. It’s one of the largest industrial buildings available in the airport area, where vacancy rates for large warehouses are less than 5%.
The Irvine office of JLL put a sign up at the building last week; brokers Joe Bevan and Louis Tomaselli have the listing.
