A pair of Orange County developers are hopping the rails to Texas, where they plan to build one of the largest high-end industrial campuses in the U.S.
CT Realty Investors of Aliso Viejo and Seal Beach-based Xebec Realty Partners recently closed on the purchase of a 530-acre tract of land about 12 miles south of downtown Dallas.
The two companies are planning to build a campus to hold close to 9 million square feet of large industrial buildings on the vacant land, which is next to an intermodal terminal run by Union Pacific Corp., the country’s largest railroad operator.
Construction on the first buildings at the project—envisioned to range in size from 500,000 square feet to 1.5 million square feet each—could begin in about a year, once entitlement and other predevelopment work is completed, according to Jim Kelly, chief operating officer for CT Realty.
The project’s build-out is expected to cost close to $500 million, according to executives for the two companies. Both speculative and build-to-suit buildings are planned.
Only a handful of speculative industrial developments totaling more than 1 million square feet have broken ground across the country in the past few years.
The high-end, big-box buildings the two OC developers have planned are expected to appeal to big companies looking to expand their distribution operations in Dallas, one of the country’s largest hubs for rail and intermodal traffic, said Xebec Chief Executive Randy Kendrick.
By acreage, the 530-acre project is the largest ever for both CT Realty and Xebec, a pair of privately held companies that to date have focused on industrial deals in California.
CT Realty has made its mark of late in the Inland Empire’s sprawling industrial market, buying close to 6 million square feet of buildings in that area over the past two years.
Xebec has focused most of its efforts in and around Los Angeles in recent years; it currently has 1.2 million square feet of industrial projects under way in the area.
SoCal Strategy
The Dallas deal is an expansion of the two companies’ Southern California strategy, which focuses on building and buying warehouse and distribution properties well positioned to serve the ports of Long Beach and Los Angeles.
“We almost view (Dallas) as simply an extension of the Port of L.A.,” said James “Watty” Watson, CT Realty’s chief executive.
The combined L.A. ports account for more than 40% of all inbound container traffic for the U.S. every year. A significant share of the traffic moves inland by rail to Dallas, typically within four or five days after leaving the West Coast, the developers said.
Industrial Market
The Dallas area’s industrial market is reported to be seeing a strong increase in interest from large users amid the improving economy.
Seattle-based Amazon.com, for example, recently announced plans to open two large regional distribution centers elsewhere in the Dallas-Fort Worth region, totaling more than 2 million square feet.
“The dynamics of the greater Dallas marketplace mirror the activity we have encountered over the last three years in the Inland Empire and other large distribution markets in Southern California,” Watson said.
The South Dallas area is seeing much of the region’s plans for new industrial development, thanks in large part to the Union Pacific intermodal facility, a 360-acre site that the Omaha-Neb.-based railroad opened in 2005 at a reported cost of $100 million.
The facility is currently handling about 365,000 containers and trailers per year. Nearly all of the containers—an estimated 97%—come directly from the ports of Los Angeles and Long Beach, according to Dallas-area brokerage data.
The Union Pacific terminal will reportedly top out with capacity to handle up to 600,000 container and trailer lifts per year. The land CT Realty and Xebec bought is just down the street from the entrance to the terminal, on the opposite side of Interstate 45.
CT Realty and Xebec used private capital for the purchase of the land in an all-cash deal. The developers will likely use institutional capital to help fund the project’s construction, which is now envisioned as a for-lease project, although some buildings could eventually be sold.
Terms of the land sale, made with a company described by the buyers as a Dallas-area residential land development group, were not disclosed.
Other developable land in the Dallas area has been trading for a little more than $2 per square foot, according to Kendrick. A similar estimate would put the price for the 530 acres close to $50 million.
The project is the largest for either company in terms of acreage, but not based on price, due to much higher land prices in Southern California, Kelly said.
Gov. Perry
The deal’s announcement comes a few weeks after Texas Gov. Rick Perry made a four-day, headline-grabbing “business recruitment trip” to California, soliciting companies in Orange County and elsewhere to move their operations to the Lone Star state.
CT Realty and Xebec will have offices in the Dallas area to support the project, but neither is planning to shift headquarters, and they do not anticipate any tenants at the new center to be companies relocating from California.
They are happy, though, to add Texas real estate to their portfolio, and “have their eyes open” for other deals in the region, Watson said.
“The state has its act together,” Kendrick said.
