Duke Realty Corp. (NYSE: DRE) continues to ramp up its Orange County real estate portfolio as it awaits completion of a $26 billion sale to the country’s largest industrial developer, Prologis Inc. (NYSE: PLD).
Duke, the Indianapolis-based industrial developer whose West Coast operations are based in Irvine, in July competed the purchase of a 10.7-acre collection of older buildings in Los Alamitos.
The eight parcels, whose buildings total around 250,000 square feet, traded for $77.2 million, according to brokers that worked on the deal.
A future industrial redevelopment is likely for the site, located about a block north of Katella Avenue, and about a half mile west of the Los Alamitos Race Course, which counts a Cypress address.
The just-bought Los Alamitos site is roughly a 3 mile drive down Katella from one of Duke’s more prominent local developments of late, a new Amazon facility in Cypress at the former Mitsubishi Motors campus. That project runs about 188,000 square feet.
A time frame and size of any new development moving ahead at the site of Duke’s latest purchase hasn’t been disclosed.
$7.2M an Acre
Duke paid about $7.2 million per acre for the Los Alamitos site, which holds several multi-tenant buildings, according to Cushman & Wakefield Inc., whose Kyle McGillen and Rick Ellison represented Duke in the transaction.
“This industrial site is strategically located on the border of Los Angeles and Orange County, convenient to the busiest port complex in North America, an extensive freeway network, two major airports, and a massive population center,” the Cushman & Wakefield duo said in a statement.
Orange County maintained a tight vacancy rate of just 1.5% in the second quarter, according to the brokerage, with new leasing activity picking up to 2.6 million square feet compared to 2.2 million square feet during the first quarter.
“The Orange County/Greater Los Angeles industrial markets remain very tight, and occupiers continue to seek out well-located industrial space,” McGillen said.
Mittera Campus
Duke bought the site from an affiliate of Don Wilson Builders, a residential and commercial real estate firm with offices in Irvine and Torrance.
The seller’s website indicates the just-sold buildings were primarily used by Mittera Group, one of the largest commercial printers in the state.
The buildings range in use “from office and warehouse to heavy industrial,” Don Wilson Builders’ website said, noting that Mittera’s local operations include printing, warehousing, recycling, transporting and offices.
The length of the tenant’s lease in Los Alamitos hasn’t been disclosed.
Local Holdings
Duke Realty manages a 19.2-million-square-foot Southern California portfolio out of a nearly 10,000-square-foot office at the 200 Spectrum Center tower and counts a sizeable amount of industrial holdings in the region.
“Our investment in Southern California is approximately 20% of our company’s portfolio and we intend to continue growing that share,” said Duke Regional President Nancy Shultz, who heads the company’s local operations along with Executive Vice President of Real Estate Operations Chris Burns.
“With the land we have banked, we are well-positioned to continue our development pipeline, but we are always researching new opportunities to acquire more land or facilities.”
The company said last month it has 3.6 million square feet of development in the pipeline for Southern California.
Prior to its deal in Los Alamitos, the firm most recently paid $35.4 million for Brea’s 2727 E. Imperial Highway with plans to redevelop the office into a 117,920-square-foot warehouse.
In Anaheim, the firm is building a 187,520-square-foot distribution building at 2871 E. La Palma St.
“We continue to invest heavily in the market to expand our Southern California portfolio and meet growing supply chain needs,” Shultz said. “In fact, there are plans to invest more than $500 million in development projects in Southern California this year.”
Prologis Sale
Orange County continues to witness a changing landscape for warehouses and e-commerce distribution centers, as well as their ownership groups.
Among the more notable mergers of late, San Francisco-based Prologis, the country’s largest industrial owner, in June announced it would add to its OC holdings through its acquisition of Duke.
The acquisition is expected to close in the fourth quarter and is the largest commercial real estate transaction in the U.S. since the start of the pandemic, records indicate.
Prologis, with an industrial portfolio around 1 billion square feet, adds 153 million square feet of assets in 19 U.S markets through the acquisition, as well as 11 million square feet in development representing a $1.6 billion investment.
Prologis already counts several notable local projects.
In Fullerton, it paid $123.7 million in 2019 for a 663,000-square-foot portion of the recently built Beckman Business Center.
Earlier this year, Prologis paid $96 million for Lake Forest’s five-building Pacific Vista office campus; an industrial conversion is expected at the site.
