Irvine-based Koll Co. has made its largest purchase in nearly five years, picking up a massive logistics and distribution center in Phoenix.
The privately held real estate developer recently completed the purchase of a 1-million-square-foot industrial building at the Buckeye Logistics Center in the southwest part of the city.
It paid a little under $74.8 million for the building—fully leased to Amazon—or about $74 per square foot.
The company partnered with an undisclosed private-equity firm based in Bahrain in the first venture between the two firms, Koll Co. officials said.
The seller was a venture between Duke Realty Corp. in Indianapolis and New York-based Gramercy Property Trust. The deal was brokered by the Phoenix office of JLL.
It’s the largest industrial purchase in the Phoenix area by dollar amount in four years, according to trade publication Business Real Estate Weekly of Arizona, which first reported the transaction. It also ranks as one of the country’s 10 largest industrial deals of the year in terms of single-asset dollars, according to Real Capital Analytics, a New York-based market tracker.
For Koll, “it was the right deal at the right time,” said Jerry Yahr, the real estate company’s managing principal.
The company is on the lookout for more value-added opportunities in the area, while the Arizona deal fit its criteria for solid cash-flow returns, he said.
The purchase marks its largest reported acquisition since its namesake and founder, Donald Koll, died in 2011.
Yahr, Koll’s son-in-law, now heads the company’s day-to-day operations, while long-term strategy is overseen by Chief Executive Ray Wirta, who also serves as president of the investment properties group at Newport Beach-based Irvine Company.
Market on Upswing
The company also is on the lookout for office and mixed-use deals to buy in the region, as well as in its home base of California, according to Koll Co. principal Scott Lanni.
It plans to spend about another $50 million on additional acquisitions by the end of the year, he said.
Koll Co. has been involved in Phoenix’s commercial real estate market since the late 1980s but sold its last property there about four years ago.
“We’d been looking (in the market) for opportunities” since last year, Yahr said. “We’ve definitely seen some improvements in the (local) market.”
Vacancy rates at industrial buildings in the greater Phoenix area now run about 10.8%, down from 11.8% a year ago, according to data from the local office of Colliers Inc. Area rents are up 7.8% over that time, according to the brokerage’s data.
OC Friendly
Koll Co. is one of several Orange County industrial developers that have been actively buying properties recently in and around Phoenix.
Last week, an affiliate of Newport Beach-based CT Realty Investors made its first deal in the market when it paid about $27.3 million for a 417,600-square-foot distribution warehouse facility in Tolleson, Ariz., which is a few miles west of Phoenix.
The seller in that sale-leaseback transaction was an affiliate of Buena Park-based States Logistics Services Inc., according to Cushman & Wakefield Inc., whose Kevin Turner, executive director in the brokerage’s Irvine office, worked on the deal.
Irvine-based industrial investor BKM Capital Partners has made 10 acquisitions in the Phoenix area this year, according to local news reports. Its latest reported deal came in June, when it paid $58 million for a five-building, 536,000-square-foot business park in Tempe.
BKM Capital now owns about 2 million square feet in the region.
“Job and housing growth are on the rise, providing a significant opportunity to create value for our investors,” BKM Chief Executive Brian Malliet said in a statement following the Tempe purchase.
OC real estate companies also have invested in other property types in the Phoenix area over the past year.
A venture headed by Irvine-based LBA Realty reportedly paid $279 million for an office complex there late last year, and Aliso Viejo-based homebuilder New Home Co. bought land for a high-end housing project around the same time in its first development in Arizona.
Olen Properties in Newport Beach, whose Igor Olenicoff is OC’s second wealthiest resident (see inside pullout section on OC’s Wealthiest people), in November bought a 388-unit apartment complex in Scottsdale.
The $88 million buy is among Olen’s largest reported deals over the past decade.
