CenterPoint Properties Closes Blockbuster Deal
- Mar 13, 2020
In one of Southern California’s largest single-asset industrial sales in the last 10 years, CenterPoint Properties has acquired 5600 E. Airport Drive, a 1.6 million-square-foot facility on a 94-acre site in Ontario, Calif. The off-market transaction marks CenterPoint’s first purchase in the highly coveted Inland Empire industrial market since 2012.
As part of the acquisition deal, CenterPoint inked a short-term leaseback with the building tenant, the identity of which the new owner isn’t disclosing; however, the property has long been home to a Kmart distribution center. Originally developed in 1980 at the intersection of two major freeways, 5600 E. Airport sits roughly 60 miles from the Ports of Los Angeles and Long Beach and just three miles from Ontario International Airport. Perhaps the most notable feature of the property, however, is the ample parking provided on the site, allowing for a parking ratio five times that of the market average.
“This property capitalizes on the robust Port market and consumption market, which is largely driven by e-commerce, and a building with excess land and parking can accommodate both those users,” Greg Pearson, vice president of investments with CenterPoint Properties, told Commercial Property Executive. “We typically target assets that have a building-to-land coverage ratio of less than 40 percent because it gives us flexibility with e-commerce or Port tenants. They’re not making any more land so the ability to offer parking gives us a competitive advantage.”
CenterPoint isn’t disclosing the transaction price, but the industrial real estate company notes that the deal dovetails with its signature “land value-plus” strategy, which entails targeting investor real estate that can be purchased nominally above the raw land value. “In this case, I could argue we purchased for less than land value,” Pearson added. “With our strategy, the full value of the improvements isn’t fully realized in the purchase price, so despite not paying much for a building, it’s still able to generate significant revenue.”
The million-plus market
With the acquisition of 5600 E. Airport, CenterPoint has made its third million-plus-square-foot addition to its Southern California portfolio in the last three years. “Demand for million-plus-square-foot buildings is one of the most robust [industrial] segments in Southern California; it has outpaced any other size range,” Pearson said. As noted in a fourth quarter report by Newmark Knight Frank, which represented CenterPoint in the 5600 E. Airport transaction, eight new leases exceeding 1 million square feet were signed in 2019, with Amazon accounting for three of those deals. Just weeks ago in February 2020, CenterPoint announced it had signed Unified Network Information Services LLC to a seven-year lease of the 1 million-square-foot CenterPoint SoCal Logistics Center at 6800 Valley View St. in Buena Park, which the company acquired in 2017 for $131.3 million in Orange County’s largest single-tenant industrial trade in 25 years.