An affiliate of struggling retailer Sears Holdings Corp. has sold a second sizable Orange County property in less than a month, the Business Journal has learned.
A nearly 315,000-square-foot industrial building on Warner Avenue in Santa Ana that Sears has long used as an outlet center and distribution facility went to an affiliate of Irvine-based real estate investor LBA Realty in mid-July, property records show.
LBA paid about $41 million for the building at 500 W. Warner, or $130 per square foot, based on a reading of property records.
It’s the second largest single-building industrial transaction in OC so far this year, according to data from market tracker CoStar Group Inc.
Plans for the property under the new ownership haven’t been disclosed. LBA Realty officials couldn’t be reached for comment.
Real estate sources familiar with the transaction tell the Business Journal that Sears will lease back the property for the short term but that it will be repositioned for new tenants once the company vacates the facility.
In addition to a Sears Outlet Center, the building is currently used by Innovel Solutions, an affiliate of the company that delivers and installs appliances for other national retailers, including Costco.
Chicago-based Innovel, which previously operated as Sears Logistics, was the seller of the property. It has 11 regional warehouses, according to its website.
A nearly 60,000 square foot industrial building next door to the larger facility at 400 W. Warner Ave. is also owned by a Sears affiliate, CoStar records show, and is occupied by Sears for product repairs. It’s unknown whether that property also traded hands in last month’s deal with LBA.
The deal is LBA Realty’s largest reported purchase in OC since December, when it paid about $65 million for the main Irvine campus of Japan-based Toshiba Corp.
Outside of OC, it’s made several notable acquisitions this year, including the $130 million buy of a business park in North San Jose where it plans potential redevelopment (see real estate column, page 43).
As appears to be the case with the purchase of the Sears facility and last year’s deal with Toshiba, LBA has bought other local properties over the past few years from corporate users unloading assets to raise cash, with an eye to redevelop and re-tenant properties before selling them at a profit.
South Coast
The deal with LBA brings Sears’ local real estate sales close to $228 million in the past month.
In July, the Business Journal first reported Sears sold its best-known store in OC and one of its most valuable real estate assets in the country—its South Coast Plaza location.
The sale also involved smaller properties at the Costa Mesa mall, which is OC’s most valuable retail property, with annual sales of nearly $1.7 billion.
The collection of buildings at the shopping center, which total about 300,000 square feet, was bought by an affiliate of C.J. Segerstrom & Sons, the developer and owner of South Coast Plaza, in a deal valued at about $187 million, or nearly $600 per square foot.
As in the case with the Santa Ana industrial facility, which is about two miles north of South Coast Plaza, Sears should remain in its Costa Mesa retail location as a tenant, at least in the short term, although redevelopment of the site appears likely.
Representatives of South Coast Plaza told the Business Journal last month that Sears “will operate the retail location as a tenant of the shopping center.”
Sears and its affiliated companies have other notable properties in Southern California where big makeovers are planned.
An 117,800-square-foot Sears store in downtown Santa Monica, for example, shuttered in April. The company’s real estate investment trust spinoff, Seritage Growth, is waiting for city approval on a mixed-use redevelopment project of offices, retail and restaurants.
The two OC sales represent a substantial windfall for Sears. Its stock has fallen more than 90% over the past decade as it’s closed locations and sold real estate across the country in order to cut costs and raise cash. Its market cap is $900 million, though its enterprise value is closer to $5 billion factoring in debt and cash.
LBA’s purchase of the industrial facility marks the second big local sale of a national retailer’s distribution building this year.
In April, CenterPoint Properties closed on the buy of J.C. Penney Co.’s massive logistics and distribution facility in Buena Park, in the largest industrial sale in OC this year.
The Oak Brook, Ill.-based industrial firm, which is trying to boost its West Coast presence, paid about $130 million for the 6800 Valley View St. building, which has nearly 1.1 million square feet of warehouse and logistics space, making it one of the largest buildings in the county.
