The Newport Beach firm, among Orange County’s most active industrial developers in Orange County over the past decade with several million square feet of projects completed, has invested nearly $100 million in recent months across sites in Brea, Fullerton and Lake Forest, as well as in Whittier.
New ground-up industrial products, totaling close to 500,000 square feet, are expected to be built at the trio of sites, according to the privately held company.
That represents a big step-up in activity for the region.
Despite plenty of increased interest from e-commerce firms for last-mile distribution sites over the course of the pandemic, there was only about 350,000 square feet of industrial space under construction in the county at the end of the first quarter, according to data from Voit Real Estate Services.
That was down from 876,000 square feet at year’s end, according to Voit.
Several other large projects, including multiple facilities for
“The industrial sector is at all-time highs across the board, which was only accelerated by the COVID-19 lockdown,” said Jeremy Mape, principal and director of acquisitions for the company.
“It’s been an incredibly competitive market as of late, and after taking a step back, we’re excited to be involved in the activity surrounding the sector in OC,” Mape said.
The vacancy rate for OC’s industrial market runs just 2.5%; monthly asking rents are up 6% from year-ago levels to $1.06 per square foot, according to Voit’s data.
Beckman Builder
The trio of deals marks a return to buying in OC for the real estate investor, which made its last major area acquisition in 2016, when it closed on a portion of the land for what’s now the Beckman Business Center in Fullerton.
Western Realco wrapped construction on the 1 million-square-foot project in 2019 and later sold the development in a series of deals topping $180 million on a combined basis, marking a very profitable exit for the developer and its investment partners.
Lake Forest
The Business Journal first reported on one of Western Realco’s three recent deals last month, when the company acquired four offices in Lake Forest that previously held portions of the operations of Panasonic Avionics, the maker of in-flight entertainment systems that’s moving its local base to Irvine.
Sources indicate the company paid close to $45 million for the four properties.
It will demolish those offices, and build two new industrial buildings totaling 75,000 and 150,000 square feet on the 13-acre site, city filings indicate.
An affiliate of Denver-based Black Creek Group is involved in the industrial conversion project, with plans to build a single 172,000-square-foot facility at a nearby site.
The projects are the first big industrial development plans in South County in years. No tenants for either development have been announced yet.
Western Realco hopes to break ground in Lake Forest within the next two months, and deliver the project by second quarter 2022.
With undeveloped land in short supply, builders of warehouses and distribution facilities have increasingly tapped underutilized retail properties and older business parks for their projects.
The Lake Forest deal shows investors are now eyeing offices—whose future remains murky as employees slowly return to on-site working—as a growing source for conversions.
Brea Conversion
Western Realco is planning a similar conversion project in Brea, a city that along with Fullerton has been its biggest source of business in recent years.
Property records indicate that a venture the company is involved with recently paid $21.1 million for 2929 E. Imperial, a 5.6-acre site a few blocks east of the Orange (57) Freeway that currently holds a 128,250-square-foot office.
It bought the property in a venture with frequent Brea partner AEW Capital Management.
As in Lake Forest, the office was once home to another maker of in-flight entertainment systems: Safran Passenger Solutions, which has moved to a new building in the area.
Instead of waiting for the office market to stabilize, the owner—an affiliate of Dallas-based office investor Palisades Capital Realty Advisors—sold the project for almost $3.8 million per acre to Western Realco.
The company will demolish the office and build a new 130,000-square-foot industrial building in its place.
Fullerton Plant
Western Realco’s recent activity has also brought the company back to Fullerton in addition to Brea.
In its third recent OC deal, the company bought the former Kraft Heinz Co. Lunchables manufacturing plant in Fullerton at 1500 E. Walnut Ave.
The company paid a reported $13.40 for the 5.1-acre site that’s been vacant since late 2018, when Kraft shuttered its operations there.
Kraft, which occupied a 121,500-square-foot building at the site, sold the property at the end of October for $2.6 million per acre.
Western Realco will develop a new 125,000-square-foot logistics building at the site near the 57 and 91 freeways.
Outside of Orange County, Western Realco is also planning a new industrial complex on 13 acres it owns in Whittier.
Western Realco said it paid about $110 million for the recent land deals, all of which were off-market transactions.
“We’ve maintained strong relationships with our investment partners throughout the pandemic, which has helped us target these off-market deals,” said Gary Edwards, principal for the privately-held developer.
“Out of all of the sectors, industrial has the most legs left in the cycle, and we’ll continue to scout well-located acquisition opportunities,” Mape added.
