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Monday, May 20, 2024

Rexford Ups Industrial Presence in OC: $263M

Rexford Industrial Realty Inc. (NYSE: REXR), one of the most active buyers of industrial real estate in Orange County the past few years, has made its largest-ever investment in the area.

The Los Angeles-based firm, which specializes in infill properties across Southern California, recently completed the nearly $1 billion purchase of 48 industrial and flex properties across Los Angeles County and OC.

The properties, totaling nearly 3 million square feet, were sold by Blackstone Inc. (NYSE: BX).

The Orange County portion of the portfolio includes 11 properties, ranging from Lake Forest to Anaheim, and totals nearly 815,000 square feet.

Property records indicate those 11 properties sold for close to $262.5 million on a combined basis, or roughly $322 per square foot.

It’s the largest reported bulk purchase of industrial properties in OC in over a year, not factoring in land deals for new development, according to property records.

98% Occupancy

The deal is a “testament to Rexford’s increased focus on buying projects in Orange County, as fundamentals are holding up here better than in any other county in the region,” according to a report by Justin Smith, senior vice president at commercial brokerage firm Lee & Associates.

Most of the OC properties in Rexford’s recently acquired portfolio are single-tenant buildings and fully occupied.

Prior to the deal, Rexford counted an OC portfolio running about 4.3 million square feet, according to its latest annual report. About 10% of the nearly $11 billion-valued REIT’s total portfolio is in the county.

The entire recently acquired portfolio is about 98% leased, according to the buyers.

That’s largely in line with the overall vacancy rate for OC’s industrial market, which along with multifamily has been the area’s best-performing real estate sector since the pandemic.

OC’s industrial market totals more than 230 million square feet and began 2024 with a vacancy rate of just 2.6%, according to data from commercial brokerage Voit Real Estate Services.

Mullen HQ

The recently bought OC properties include a mix of older buildings, as well as some newly built facilities.

Among the newer additions is 1500 E. Walnut Ave., a manufacturing facility in Fullerton that opened in 2022.

The building, running about 122,000 square feet, sold for $50 million, or about $411 per square foot.

The Fullerton facility is leased to Brea-based EV maker Mullen Automotive Inc. (Nasdaq: MULN).

Mullen uses the property, located roughly 3 miles from the Riverside (91) and Orange (57) Freeway junction, as its new battery development and production plant.

Placentia Tops

The priciest single-building sale in OC was for a former production site for Knott’s Berry Farm in Placentia.

That 198,000-square-foot building, at 200 Boysenberry Lane is now leased by Arlon Graphics, according to data from real estate market tracker CoStar Group Inc. It sold for $70.8 million, or $357 per square foot, records indicate.

Originally built in 1985, the site was home to Knott’s Berry Farm’s jam production operations for more than a decade. The site’s usage pivoted in 2013, when Arlon, a manufacturer of signs, car wraps and corporate imaging, struck a long-term lease for the expansive industrial building.

Playing the Long Game

Unlike some recent buys of office properties in OC, where industrial redevelopment has been proposed, Rexford has not indicated any plans for redevelopment of its newly purchased properties.

A recently traded asset with notably long-term tenants is Glenwood Business Park in Santa Ana, which spans 106,604 square feet along E. St. Gertrude Place.

The manufacturing site, originally built in 1962 and renovated in 1973, has been leased by plastic container maker Altium Packaging for over two decades.

Rexford paid $25 million, or roughly $235 per square foot, for the property, which sits less than 2 miles from the Costa Mesa (55) Freeway.

Another building leased by a long-term tenant is a Fullerton facility at 4141 N. Palm St., a 100,000-square-foot flex property that was completed in 1983.

According to CoStar, the building is fully occupied by aircraft products maker Adams Rite Aerospace Inc., which uses the property as its headquarters.

Rexford bought the building for $24 million, which works out to about $240 per square foot, records indicate.

Other OC Assets

Rexford’s portfolio acquisition comes a few months after the company paid aerospace defense company L3Harris Technologies Inc. (NYSE: LHX) $57 million for a 12.1-acre site in Anaheim.

The company 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 buildings are about a mile northeast of Disneyland, on the opposite side of the Santa Ana (5) Freeway as the theme park.

The Anaheim revamp will join a host of other local redevelopment projects Rexford has in the works, including four office-to-industrial conversions.

Those four sites, along with the L3Harris property, were bought for a cumulative $318 million, in deals starting in 2021.

Prominent sites Rexford bought include the Fox Racing headquarters at 16752 Armstrong Ave. in Irvine, which it 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.

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 Group Inc. records.

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