Albertsons Cos.’ sprawling Irvine distribution center, which includes the largest industrial building in South Orange County, has traded hands in a sale-leaseback deal for about $278 million, the Business Journal has learned.
The sale is the largest single-property commercial real estate transaction by price in OC in nearly three years, brokerage data indicates.
The multibuilding facility at 9300 Toledo Way runs about 1.2 million square feet, and includes one of just a handful of buildings in OC to top 1 million square feet. It was bought by a venture headed up by Oak Brook, Ill.-based industrial investor CenterPoint Properties.
CenterPoint bought the site in a venture with the California State Teachers’ Retirement Pension Fund, according to brokerage JLL, which was not involved in the sale but has previously worked with the seller.
Albertsons, a privately held grocery chain that also operates stores under the Safeway, Vons, and Pavilions banners, has a leaseback deal for the site that spans at least 20 years, regulatory filings indicate.
It’s the second such transaction for the grocer since the end of last year, when its 1.1 million-square-foot Brea distribution center was sold to an investment affiliate of Deutsche Bank for just over $200 million, or roughly $160 per square foot. That was also a sale-leaseback deal with a term reported to be at least 15 years.
The just-sold Irvine property near the southern edge of the Great Park Neighborhoods development site traded for about $230 per square foot. It has some excess land that in theory could hold additional development.
The grocer bought the 75-acre parcel in the Spectrum area of the city from the Irvine Co. in 1980 and built its main 1 million-square-foot core building. It added a 200,000-square-foot facility for refrigerated goods to the site a few years ago. All the buildings at the property, not far from the FivePoint Amphitheatre, were sold to CenterPoint.
The deal was brokered by Eastdil Secured LLC.
No Operational Changes
The sale shouldn’t affect day-to-day operations of Albertsons, 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.
“They plan to be in this marketplace for the very long term to serve all of their stores in Orange County and Southern California as best in class operators,” said JLL Senior Managing Director Louis Tomaselli.
The company 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, the Boise, Idaho-based company still reports some financial results for its bondholders. Its latest quarterly report, filed in mid-July, made reference to a sale-leaseback transaction for one of its larger distribution facilities, but did not specify the location.
The company’s local real estate has been a source of opportunity for developers and investors the past few years.
In addition to the Irvine and Brea sales, it also unloaded a handful of excess industrial properties in Los Angeles County, including a property just over the county line in Santa Fe Springs, in 2016 to Irvine’s Goodman North America. The price of that 133-acre deal, brokered by JLL, was reported to be in the $240 million range.
Doubling Up on Distribution
CenterPoint now has three OC properties to its name, including two of the largest industrial buildings in the county.
In 2017, it made the largest local industrial deal of the year, buying a 1.1 million-square-foot Buena Park facility that was previously home to a J.C. Penney Co. distribution center.
The company paid the struggling Texas-based retailer $131.3 million, or nearly $119 per square foot, for the building.
J.C. Penney has since relocated its area distribution operations to the Inland Empire. CenterPoint is looking to lease up that currently vacant and recently renovated site; CBRE Group Inc. has the listing for the Valley View Street property, now known as the CenterPoint SoCal Logistics Center.
The nearly $100 per-square-foot price difference between CenterPoint’s Irvine and Buena Park sites is a function of occupancy; Albertsons’ plan to stay on as a tenant in Irvine was likely a positive for CenterPoint and its investment partner, according to Clyde Stauff, a senior executive in the Irvine office of Colliers International.
“It’s a very large complex that is uniquely suited for a tenant like Albertsons, so it might have taken a while to lease it to a different company,” said Stauff, one of the area’s top industrial brokers. “The long lease definitely adds value.”
CalSTRS “wanted this building as it is a very long-term secure credit tenant industrial hold for their teachers’ fund,” according to JLL officials, who added that it was “an excellent low risk asset to buy in today’s market.”
CenterPoint has one additional OC property under its control, a 121,300-square-foot building in Huntington Beach that it bought in 2011.
