Western Realco isn’t the only game in town right now when it comes to industrial development in Orange County.
But it’s close.
The Newport Beach-based developer, one of the most active builders of industrial properties in OC since the last recession, is breaking ground this month on its largest-ever local project, a multibuilding business park on land in Fullerton that previously held the headquarters of Beckman Coulter Inc.
The 44-acre site, vacant except for one midsized office that will be redeveloped, is being turned into an eight-building project of just under 1-million-square-feet.
It’s the largest industrial project in OC to start in about four years, and comes at a time when new warehouse, distribution and other industrial projects in the county are few and far between, despite sector vacancy rates near an all-time low of 2%.
Less than 400,000 square feet of industrial space was under construction in all of OC as of midyear, according to local brokerage data.
“Even though the market is craving new, Class A product, Orange County is simply short on industrial land,” noted a midyear market report by Newport Beach-based Voit Real Estate Services.
Locally, “there’s not a lot of opportunities,” said Western Realco principal Gary Edwards.
You wouldn’t know that, looking at the company’s recent activity in the area.
A good portion of the county’s industrial product that was under construction as of midyear was being built by Western Realco, which has an 181,000-square-foot project wrapping up this month elsewhere in Fullerton on Palm Street, just off Imperial Boulevard.
Its other recent area projects include 3300 E. Birch St., a nearly 219,000-square-foot facility it built last year in Brea—a city that’s been a frequent source of new development the past few years—and is finishing leasing it out.
Whynter LLC, a Santa Fe Springs-based provider of housewear products, last month signed a deal to occupy about half of the facility; brokers with the local office of Newmark Knight Frank are handling leasing for the rest of the property.
Including projects outside OC, the company has nearly 2 million square feet under construction, not counting the former Beckman Coulter site.
Two New Deals
More is in the works for the developer after it paid nearly $40 million to buy two additional area sites in the past week.
Late last month, it closed on an 8.6-acre site in Anaheim about half a mile north of Angel Stadium, according to Jeremy Mape, director of acquisitions for the company.
The site, at 14242 E. Winston Road, was sold by a private investor and traded hands at an undisclosed price that real estate sources said was in the $13 million to $14 million range.
“We have a couple ideas for the site,” said Edwards, who added that the company’s already been approached by a few interested users.
It was one of two local purchases by Western Realco in late July, Mape said. It also bought an 11-acre property in Garden Grove on Monarch Street for $27 million.
The Garden Grove deal, which includes an existing 277,000-square-foot, fully leased building, has the potential for repositioning, according to Edwards.
Executives at privately held Western Realco attribute much of the company’s recent success in finding area projects to its good relations with the area’s brokerage community and strong financial partners.
“They’re a lean group and are very good at keeping their finger on the pulse of the market,” said Jeff Read, executive managing director for Newmark Knight Frank’s Newport Beach office, who was part of the brokerage team that worked on the Garden Grove sale and is representing Western Realco for the Birch Street property in Brea.
“When they see an opportunity, they can dig in quickly,” Read said.
An aggressive streak also plays a part in the company’s recent success, Edwards said.
“We’ve punched above our weight class.”
August Start
The former Beckman Coulter site, at the northeast corner of Harbor Boulevard and Lambert Road near Imperial Highway, is a definite step into the heavyweight division of industrial development.
“It’s been our most complicated project,” Edwards said of the site. Work will start there this week.
Western Realco bought the site in two transactions, the first closing in late 2015 in a venture with Hartford, Conn.-based Penwood Real Estate Investment Management, a frequent co-investor in its projects.
Terms of the sales, which occurred in 2015 and 2016, were not disclosed. The Business Journal estimated the cost of the 44-acre property at about $65 million, based on nearby sites selling for about $1.5 million per acre.
Wells Fargo is the lender for the project, whose total cost is estimated in the $130 million range.
Initially the goal was to kick off construction by early this year, but finalizing plans and getting the necessary entitlements took longer than expected.
The project, now called Beckman Business Center, has buildings ranging in size from 42,000 square feet to 309,000 square feet and is being offered both for sale and for lease.
Voit Real Estate’s Seth Davenport, Mitch Zehner and Michael Heffner have the listing for the buildings, which will be completed by next summer.
“It will have a business-park feel,” with targeted users to include those with corporate headquarters at the site, as well as logistics firms and light industrial businesses, Edwards said.
The site has been unused since 2009, when Beckman, a maker of medical testing and research equipment, moved its headquarters to Brea.
It was considered for residential and retail uses before Western Realco bought the land.
Office and industrial rental rates in North County are slightly below the county average, per industry sources Voit and Colliers International. Asking rates for a Class A office average about $2.19 per square foot in North County, and industrial rents fetch about 78 cents per square foot.
Late 2018 Wrap-Ups
The company was among the first developers of any property type in OC to begin building again following the last recession, and have built about 2.1 million square feet of space here since 2010. It’s also rehabbed an additional 1 million square feet of local properties over that time.
Its executives are keeping a close eye on signs of the next downturn.
OC’s economic fundamentals continue to look strong, and despite the high price of land here and other expenses—California Environmental Quality Act costs can easily add $300,000 or more to an individual project—the area’s lack of new industrial supply portends good things for the near term, Mape said.
Other markets where the company is active carry more potential risk down the road, Edwards said.
“We’re trying to be a little careful about the Inland Empire. There’s potentially an overbuilding situation (there),” he said.
The company has Inland Empire projects in the works in Ontario, Perris and San Bernardino, and is close to completing a couple of additional sites in the region, Mape said.
Western Realco’s aiming to have just about everything in its development portfolio, including the former Beckman site, completed by the end of next year in order to mitigate its risk.
“We’re trying to get in the dirt very quickly,” Mape said.
A development time frame for starting work at its two latest OC purchases in Garden Grove and Anaheim haven’t been announced yet.
Newmark Knight Frank’s Read, Kevin Shannon, Scott Schumacher and Bret Hardy represented the seller of the Garden Grove facility, Colony Northstar, in that $27 million deal.
Western Realco bought the site, at 12752-12822 Monarch St., in a venture with Penwood Real Estate.
Voit Real Estate’s Robert Socci represented the seller of the Winston Street land in Anaheim, a private investor.
