Rexford Industrial Realty Inc. (NYSE: REXR) has added another sizeable industrial redevelopment project in Orange County to its portfolio, with the $57 million purchase of a 12.1-acre site in Anaheim.
The Los Angeles-based real estate investment trust, valued at $12 billion as of last week, bought the site from Melbourne, Fla.-based aerospace defense company L3Harris Technologies Inc. (NYSE: LHX). Rexford aims to redevelop the site, following a two-year leaseback to L3Harris, real estate sources indicate.
Plans for the project call for a 264,000-square-foot Class A building to be built on the property, located at 600, 602 and 708 E. Vermont Ave. The properties are about a mile northeast of Disneyland, on the opposite side of the Santa Ana (5) Freeway as the theme park.
The existing buildings at the site run about 96,000 square feet and are currently underutilized, according to Rexford Chief Investment Officer Patrick Schlehuber.
The redevelopment play “is projected to generate a 6.7% unlevered stabilized cash yield on total investment,” said Rexford, which paid about $4.7 million an acre for the site.
North OC’s industrial market, which totals nearly 120 million square feet of space, counts vacancy rates of only about 1%, according to local brokerage data.
Louis Tomaselli and Zach Niles of JLL represented both Rexford and L3Harris in the deal.
The acquisition comes as industrial properties continue to be a top investment choice for REITs and developers, according to real estate sources.
OC is also a prime area for industrial redevelopment projects, like those headed by Rexford, since about 70% of its properties are at least 40 years old.
At the end of L3Harris’ two-year lease for the property, the company will consolidate its operations to another local location, real estate sources tell the Business Journal.
Rexford aims to deliver the site’s new industrial development by 2027.
Office to Industrial
The property is one of many in OC owned by Rexford. The REIT counts about 40 million square feet of real estate in Southern California, around 10% of which is in OC.
Rexford’s focus is investing in and operating industrial properties located in infill areas.
“We prefer repositions over redevelopments because they have less ESG impacts,” Schlehuber said. Revamping an existing structure has a “much smaller carbon footprint than knocking down a building and starting from scratch,” he added.
Rexford’s revamp of the just-bought Anaheim site will join a host of other local redevelopment projects it has in the works, including four office-to-industrial conversions.
Those four sites, along with the new Anaheim property, were bought for a cumulative $318 million, in deals starting in 2021.
Prominent sites it bought include the Fox Racing headquarters at 16752 Armstrong Ave. in Irvine, which Rexford acquired a year ago for $40 million. The motocross and mountain bike gear and apparel retailer’s lease expires at the end of 2027, property records indicate, with two five-year extension options.
Plans for the site’s 81,600-square-foot office and warehouse space remain flexible.
The building is so “unique, interesting and modern that it could have several future lives if the tenant decides to leave,” Schlehuber said.
“We could return the site to its industrial roots, add onto the existing building—because there’s excess land they have a racetrack on—or start over.”
Another long-term redevelopment play for Rexford is a nearly 370,000-square-foot office complex at 1801 E. St. Andrew Place in Santa Ana. Rexford in 2021 paid $105.3 million for the property, dubbed Pacific Corporate Center, which runs 21.3 acres just west of the Costa Mesa (55) Freeway.
The center, built in 1987, is currently home to one of Santa Ana’s largest employers: Behr Paint, a manufacturer and supplier of architectural paint and exterior wood care products.
Behr’s lease runs through November 2032, according to CoStar records.
Orange’s Volt Campus, a 12.5-acre lot between the Costa Mesa and Orange (57) freeways, is also a proposed office-to-industrial conversion by Rexford.
The property is long home to staffing services company Volt Information Sciences Inc. (NYSE: VOLT).
Rexford in 2021 paid $70 million for the campus’ four office buildings, which run about 191,000 square feet along North Glassell Street.
A year later, it paid $46 million for a 96,534-square-foot building at 15771 Red Hill Ave., located across the street from the northwestern edge of the Tustin Legacy development.
Rexford plans to redevelop that office property, known as Airspace, into an industrial facility after leases for the building’s long-term tenants expire.
Santa Ana Sale
Rexford said it used the proceeds from another local transaction to fund its acquisition of the just-bought Anaheim site.
The company last month sold Harbor Warner Business, a multitenant industrial park in Santa Ana, to an LLC with ties to Newport Beach-based Newport Capital, a provider of real estate private credit, for $11.3 million.
The deal for the 38,643-square-foot park works out to about $292 per square foot.
Rexford in 2007 paid $4.1 million for the industrial park.