The Garden Grove-based Abbey Company, which has been an aggressive buyer of mid-size commercial and industrial buildings in Southern California, is expanding its purchasing plans.
With a new $100 million line of credit from Bank of America, the company founded in 1990 by veteran local real estate broker and developer Don Abbey is setting a target of spending $30 million to $40 million a quarter on new real estate investments.
“As we move into the year 2000, our business focus will remain on the same types of properties that we’ve previously been buying,” said Scott San Filippo, Abbey’s vice president of operations. “But the engine will be fueled by our most recent line of credit.”
Abbey Co. has been purchasing at a rate of around 1 million square feet of new properties annually. It is targeting at least a half-million square feet more of acquisition activity in the new year, drawing on the Bank of America credit line and existing financial reserves.
“We will continue to buy existing, well-located Class B and Class C retail, office and industrial properties,” said San Filippo.
The company, which started as a one-man operation with a 30,000-square-foot North Long Beach retail strip mall, has become a major player on the local real estate market during the past three years.
During that time, it has built a portfolio of more than 3.2 million square feet. All of those holdings, except for a 66,000-square-foot retail mall in Santa Maria, are in Southern California.
But Abbey Co. executives plan to move into Northern California in the coming year, along with buying more properties in San Diego, Orange County and Los Angeles. The firm also is planing to be more active in the Inland Empire.
“Typically, we don’t look at properties under $2 million,” said Rob Albrecht, vice president of acquisitions for the Abbey Co. “Our average price range is between $5 million to $8 million a property, but we have been involved in higher-priced deals.”
In August, the 40-person Abbey Co. purchased a 450,000-square-foot office and industrial complex in Ontario. The company paid $18.3 million for the Transpark Business Center.
“We’re not the type of company that likes to go in and rip down an old fa & #231;ade and put up a new one , we’re not rehabbers typically,” said Albrecht. “We’ll put on a new coat of paint, fix up a parking lot and do our own landscaping. But we’re looking for existing income-producing properties where we can take advantage of changing rent rolls or inefficiencies in property management to produce higher returns.”
The company takes an all-cash, quick turnaround approach.
“Our typical deal closes within 30 days,” said Albrecht. “In return for being a very quick buyer, we try to look for better-than-average pricing structures on deals.”
In most cases, those acquisitions involve 40,000 to 100,000 square feet of space at a time. “Most REITs consider the type of properties we go after as too small and too management-intensive,” said San Filippo. “We started buying aggressively several years ago, when REITs were snapping up a lot of deals. So we’ve carved a niche for ourselves making acquisitions just outside of their radar.”
The Abbey Co. plans to continue with that strategy and has already moved forward on two new purchases.
In Commerce, it is negotiating to close a deal for a single story, one-tenant office building that will cost in the $2 million-to-$3 million range.
The Abbey Co. is also close to making a deal for a multi-tenant office park in Bakersfield. The deal is valued at around $7 million.
The firm’s current portfolio is valued at almost $300 million.
The latest Bank of America credit follows a $120 million line of credit provided by J.P. Morgan in 1997.
“An equity partner is not what we typically look for,” said San Filippo. “We wanted straight debt (in taking out lines of credit). Typically, debt is cheaper in the long run than equity. And it gives us more management control.” n
