Real estate investment adviser Bentall Kennedy has made one of the largest industrial acquisitions ever in Orange County, buying close to a million square feet of recently built space in Anaheim.
The Toronto-based real estate money manager, whose U.S. operations are based in Seattle, recently closed on the purchase of seven buildings at Anaheim Concourse, the 80-acre industrial project built on land near the Riverside (91) Freeway that once served as a campus of Boeing Co.
The buildings total 965,255 square feet and comprise the for-lease portion of Anaheim Concourse—the largest industrial development built in Orange County in over a decade.
Bentall Kennedy paid about $188 million, or $195 per square foot, for the buildings, according to Darla Longo, CBRE Group Inc. vice chairman, who works out of the brokerage’s Ontario office. The deal closed around the end of September.
By total price, it’s the largest sale of OC industrial buildings in one location in at least 10 years, according to data from market tracker CoStar Group Inc.
The per-square-foot price also represents an all-time high for larger industrial sales in the region, according to Longo, whose Western U.S. National Partners division had the listing for the property.
The deal translates to a capitalization rate in the 4% range, she said.
Prime Property
The buildings were completed in the last two years. They are 86.3% leased and bring in about $6.8 million in annual rent, with annual lease rate increases averaging 3%, according to CBRE’s marketing materials.
Notable tenants at the buildings—between La Palma Avenue and Miraloma Street—include Walt Disney Parks and Resorts, which uses a 161,794-square-foot building to support its local theme park and resort operations.
Other tenants include L&L Food Holdings, Longust Distributing Inc., Nellson Nutraceutical and Phillips Feed Service.
The high price reflects the limited amount of new, high-quality industrial product now on the market in Southern California, and a sizeable field of large investors looking to buy those assets.
The enviable location is another key factor, according to Longo.
“It’s about as core as it gets when you look at infill Class A assets,” she said.
The buildings were sold by a venture between Newport Beach-based developer Panattoni Development Co. and financial partner Clarion Partners in New York.
Panattoni bought the land more than eight years ago following Boeing’s departure from its longtime campus in northeast Anaheim.
The developer held off groundbreaking for several years after the recession, and construction didn’t begin in earnest until early 2014.
The recent sale would include most of Panattoni’s remaining holdings at Anaheim Concourse, which total about 1.4 million square feet and 14 buildings. The balance of the development was built as for-sale properties and is being used by other owners.
CalPERS
Bentall Kennedy bought the Anaheim buildings on behalf of California Public Employees’ Retirement System, the largest pension fund in the U.S.
CalPERS took an ownership stake in longtime investing partner Bentall Kennedy—now a part of Toronto-based Sun Life Financial Inc.—in 2012 with a $100 million investment.
Last month the pension fund announced it had allocated another $400 million for Bentall Kennedy to invest “in high quality class A industrial properties located in targeted U.S. markets that generate stable and predictable cashflows and returns over a long-term hold,” according to a company statement.
Institutional investors like CalPERS generally are considered to be under-allocated in their ownership of high-quality industrial holdings, according to CBRE’s Longo, who worked on the Anaheim transaction with colleagues Barbara Emmons, Rebecca Perlmutter, Michael Kendall, Brad Bierbaum and Ryan Peterson.
OC Ties
The Anaheim deal is the first commercial property that Bentall Kennedy is known to have bought in OC in the past few years, although it has ties to the region through its executive team.
Michael McKee, the former No. 2 executive at Newport Beach-based Irvine Company, took over the chief executive role for the company’s U.S. operations in 2010, when it was known as Kennedy Associates Real Estate Counsel LP.
McKee stepped down from the post in July. He currently is serving as executive chairman of Irvine-based healthcare investor HCP Inc. and is listed as a senior adviser at Bentall Kennedy.
