Paper Mart, a City of Commerce-based packaging supply company, is moving to Orange after making the largest industrial building buy the county’s seen so far this year.
The family-owned company paid $22.2 million for a 246,732-square-foot distribution building with office space at 2164 Batavia St., a few blocks from the Orange (57) Freeway.
The building is the onetime headquarters for Tustin-based alcohol distributor Young’s Market Co., but has been vacant for more than a year.
Paper Mart is consolidating operations from two Los Angeles County sites.
The Orange building has 35,658 square feet of office space that the company will use for its headquarters.
Paper Mart—which also operates as Frick Paper Co.—employs about 120 people.
The company’s been in business for nearly 90 years and sells boxes, bags, paper and other supplies. Its warehouse holds some 15,000 items, according to Paper Mart’s website.
The sale’s the latest sign of a revitalized local industrial market, particularly for businesses seeking to own their buildings rather than lease, said Jeff Read, executive vice president for the Orange office of Santa Ana-based Grubb & Ellis Co.
Grubb & Ellis represented the seller in the deal, Northern California’s Orchard Partners LLC.
“A lot of people are kicking tires,” said Brian Bennett, a senior vice president with the Newport Beach office of tenant brokerage CresaPartners. “If a company’s looking to stay (at a location) for a long term, it makes sense” to consider buying.
Cresa represented Frick Family Properties LLC, the recorded buyer of the property.
Paper Mart had been looking to buy a building for several years but couldn’t find a building to its liking at the right price, said Bennett, who worked with Cresa’s Jeff Shepard on the deal.
Some of the company’s owners live in northern San Diego County and were looking for a location closer to home.
“The stars aligned” when they found the Batavia building, Bennett said.
The building provides some room for growth. The company’s two L.A. locations totaled about 200,000 square feet of space, or about a fifth less than what it will have in Orange.
The Paper Mart buy is one of the largest industrial deals Grubb’s Read said he’s seen that included Small Business Administration financing, which can go as high as $4 million. The rest of the buy was financed with a conventional loan and cash.
Improving Sales
Business owners “are still out there and are willing to step up and buy,” he said. “I think this is a good indication of the overall improvement in the (industrial) market.”
It’s a marked turn from a disappointing 2009, which saw only five industrial sales of more than $10 million, according to real estate tracker CoStar Group Inc.
So far this year, there have been at least six such sales in OC, with the Batavia building being the biggest.
Most of the buildings trading hands in the past six months have been snapped up by business owners lured by discounted prices and improved financing options, including SBA loans.
Read and partner Greg Osborne have worked on a trio of large sales to business owners in the past six months in North County. The deals total about $50 million, according to Read.
Other deals include a $16.9 million sale in Buena Park, as well as the $12.3 million sale of the Fullerton site that previously housed local operations of Chicago-based cardboard box maker Smurfit-Stone Con-tainer Corp.
Like those two sales, the Paper Mart deal closed at a discounted price compared to sales made just a few years ago.
The $22.2 million Batavia Street sale traded hands for about $90 per square foot. Orchard Partners reportedly acquired the building in 2007 for close to $125 per square foot, or about $30 million.
The 2007 sale by Young’s Market included a short-term leaseback for the liquor wholesaler, which later moved its headquarters to Tustin and its distribution operations to the Inland Empire.
Orchard Hills had been marketing the building for sale or lease after Young’s departed, with an initial asking price of about $110 per square foot, or about $27 million.
Drops in price are taking place across all parts of the local industrial market.
By year’s end, the median sales price for all industrial space in OC will be about $120 per square foot, down some 40% from the peak of the market in 2008, according to forecasts made this month by the Newport Beach office of Voit Real Estate Services.
