A massive industrial building in Brea that serves as a distribution center for much of Albertsons Cos.’ operations in Orange County quietly changed hands around the start of the month, in what records indicate is the largest single-building property sale here in over a year.
An affiliate of Deutsche Wealth & Asset Management, a global alternative investment management business that also operates as RREEF, recently completed the purchase of 200 N. Puente St., a roughly 1.2-million-square-foot distribution building between Imperial Highway and Lambert Road.
The sprawling property is about two miles west of the Brea Mall and the Orange (57) Freeway.
Property records show that Albertsons sold the building for just over $200 million, or roughly $160 per square foot.
The deal was brokered by the Los Angeles office of Eastdil Secured LLC.
It’s only one of just seven commercial real estate deals in Orange County to trade over the $200 million mark since 2017, and the largest single-asset property sale in the area to top that mark since 2016, according to records from real estate market tracker CoStar Group Inc.
The sale isn’t expected to affect the day-to-day operations of Albertsons, a privately held grocery chain that also operates under the Safeway, Vons, and Pavilions banners.
Albertsons plans to remain in the property under a leaseback deal that will run at least 15 years for its initial term, the company disclosed in a mid-January regulatory filing.
It’s the largest grocery chain operating in OC and the sixth-largest employer in the county with more than 7,000 local workers, according to Business Journal research.
It’s estimated that more than 500 of those employees work out of the nearly 60-acre Brea facility, which was built in 1973.
$660M of Sales
The Brea property was one of five distribution centers that Albertsons sold off in a series of transactions closing the last week of December and in early January, according to the company, which did not disclose the specific locations of the buildings sold, nor the buyer.
Other buildings selling include multiple sites in the Pacific Northwest that were also bought by affiliates of Deutsche Wealth, according to CoStar records.
The five property sales totaled about $660 million, according to Albertsons. The Brea facility appears to be the largest of the five to trade hands, as well as the most valuable.
Albertsons said it will pay about $38 million in total the first year of the leaseback deal, which “includes 1.5% to 1.75% annual rent increases over the initial lease terms,” the company said.
Albertsons, based in Boise, Idaho, is owned by an investor group led by New York-based Cerberus Capital Management LP, which bought the company in 2013 and later merged it with the Safeway chain.
While privately held, it still reports some financial results for its bondholders.
The company operates 23 distribution centers across the country. Along with the Brea facility, which has roughly a quarter million square feet of refrigerated space, it also owns a 1-million-square-foot Irvine distribution facility. That site was expanded a few years ago to include more refrigerated warehouse space.
There have been no indications that the chain plans to sell the Irvine location.
Strong Activity
The Brea facility is about two miles east of Fullerton’s Beckman Business Center, a recently-built eight-building, 1-million-square-foot development headed by Newport Beach-based Western Realco.
The Business Journal last week broke the news of San Francisco-based industrial giant Prologis Inc. snapping up the three largest buildings at the Fullerton project, paying about $124 million in a deal that closed this month.
The sudden amount of sales activity, and strong pricing, is no surprise given the strong state of the area’s industrial market, according to Clyde Stauff, senior executive vice president at the Irvine office of Colliers International.
“There’s very little inventory to buy in Orange County, so pricing remains tight,” said Stauff.
OC’s industrial base of 231 million square feet has a vacancy rate of just under 2.7%, according to year-end data from Voit Real Estate Services.
For the 40 million square feet of buildings in OC larger than 200,000 square feet, vacancy rates run about 4%, according to Voit’s data.
More in Store
Albertsons’ Brea and Irvine distribution buildings are two of just four stand-alone industrial buildings in OC larger than 1 million square feet, according to CoStar records.
The other two mega-buildings have seen notable activity of late.
6800 Valley View St., a nearly 1.1-million-square-foot facility in Buena Park, sold in 2017 for $131.3 million—roughly $119 per square foot—to Oak Brook, Ill.-based CenterPoint Properties.
The Buena Park site previously served as a distribution center for JC Penney, which is in the process of vacating the facility, now known as CenterPoint SoCal Logistics Center.
No new tenants have been announced to take the place of JC Penney, which is relocating distribution facilities to the Inland Empire.
In Fullerton, paper goods manufacturer Kimberly-Clark Corp. of Dallas owns and operates a 1.3-million-square-foot facility along East Orangethorpe Avenue.
Kimberly-Clark, maker of Kleenex and other related products, announced last year plans to shutter the facility, which employed more than 300 people.
That 66-acre facility has been listed for sale and is likely change hands sometime this year, multiple sources tell the Business Journal. A wholesale redevelopment of the site is a possibility, depending on the buyer.
“There’s no shortage of people raising their hands” for that property, Stauff said.
