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Wednesday, May 29, 2024

Industrial Investor Pays $24M for Teva’s Irvine Campus

Drugmaker shuttered 6.7-acre site last year

Teva Pharmaceuticals Industries Ltd. has sold its Irvine facilities for what property records indicate to be about $24 million, about a year after the drugmaker decided to permanently shutter the manufacturing site after contamination concerns from the Food and Drug Administration.

The sale comes a few months after the $11 billion-valued company (NYSE: TEVA) put the 6.7-acre site on the market. Prior reports cited real estate sources that suggested the site could fetch upward of $50 million, given recent pricing sites eyed for new industrial projects.

An industrial redevelopment may still occur; the new owner is Newport Beach-based EBS Realty Partners, a commercial real estate investor that typically invests in and develops industrial and office projects in the Inland Empire, but has been more active in the region in recent years.

The lower-than-expected price paid for the campus is in part due to weakened market conditions and troubled debt markets since the facilities hit the market last year, according to EBS Principal Patrick Remolacio.

Located near the southern edge of the Great Park and Albertsons’ massive distribution hub in Irvine, JLL had marketed the site as “a rare opportunity to redevelop the site with brand new, state-of-the-art industrial to meet the strong tenant demand.”

The industrial-zoned site along Hughes Avenue includes three existing industrial and R&D buildings totaling about 186,000 square feet, the largest being Teva’s main, 88,000-square-foot facility at 19 Hughes.

March Closure

All three buildings were previously occupied by Teva Pharmaceuticals, which had been the second largest drugmaker in Orange County with about 300 workers here when its Irvine base was last fully operational. Its headquarters are in Tel Aviv.

Teva, which acquired the facilities in 2007 for an undisclosed price, was forced to close some of its local facilities in 2021 after an FDA inspection reportedly found the company hadn’t repaired water damage at the site and hadn’t maintained procedures to keep factory workers from spreading mold and bacteria.

The closures were expected to potentially impact approximately 25 pharmaceutical injectables that were manufactured at the plant, including five essential medications where Teva supplied greater than 15% of the market in the last year, according to reports last year.

Last March, Teva announced plans to permanently cease manufacturing operations at the site, and transfer products to other sites. It took a $54 million write-off as a result of the move, according to regulatory filings.

OC Project Portfolio

The site is near the Santa Ana (5) and San Diego (405) freeway interchange, with “ground-zero access to SoCal’s 23+ million residents,” brokerage materials indicate.

Conceptual redevelopment plans listed by JLL include two industrial buildings totaling nearly 133,000 square feet, including a 72,882-square-foot building and a second 59,980-square-foot building, as a potential option for the site.

EBS paid about $3.6 million per acre for the property in a venture with Connecticut-based Penwood Real Estate Investment Management, records indicate.

EBS is weighing several options for the site in light of new market conditions.

Teva’s lease runs at least a few more months, EBS said, at which point the developer will look at the potential to redevelop the site on a build-to-suit or speculative basis, or lease the buildings as is to interested users. The latter may prove more cost-effective for the new owner, which cited proposed changes to Irvine’s entitlement process as a headwind for redevelopment.

“The planning staff has proposed a requirement of conditional use permits for new industrial properties, which would add a considerable amount of time to the entitlement process and would be problematic to future users,” Remolacio told the Business Journal.

Anaheim Venture

It’s not the first local acquisition for the EBS-Penwood venture.

In 2021, the duo acquired the former LT Platinum site next to Angel Stadium in Anaheim’s Platinum Triangle.

An entity with ties to Irvine-based Camphor Partners sold the site at 2030 S. State College Blvd. for $43.8 million, or about $3.1 million per acre.

The site, once eyed for a major mixed-use development featuring high-rises, includes an approximately 100,000-square-foot warehouse that is leased through the beginning of next year; EBS may renovate the building upon the lease expiration.

As for the surplus land on the 12-acre site, EBS is planning infrastructure upgrades to make the land available for outdoor storage users.

The company is not exploring a mixed-use redevelopment at this time.

Rivian Hub

In 2019, EBS made its first reported local buy in several years when it closed on a 95,000-square-foot Tustin building for nearly $20 million.

The site at 14192 Franklin Ave., just south of the 5 Freeway, was revamped and is now used by Rivian Automotive Inc. (Nasdaq: RIVN), which signed a lease for the space in 2020.

It’s one of several buildings that Rivian occupies in the immediate area; its headquarters are a few blocks away, on Myford Avenue in Irvine.

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