MCA Realty Buys Rare Inland Empire Industrial Assets
- Sep 18, 2015
For a combined $36.8 million, MCA Realty has purchased two multi-tenant industrial assets totaling more than half a million square feet in the Inland Empire.
“The industrial market in the Inland Empire is performing tremendously well, with extremely low vacancy rates driving up both demand and rental rates for properties throughout the area,” Tyler Mattox, a principal at MCA Realty, said in prepared remarks. “This makes the timing of these acquisitions extremely favorable. We intend to exploit the potential in these assets, and expect them to deliver long-term, stabilized cash flow.”
In a joint venture with Saunders Property Company, MCA paid $30.5 million for the purchase of a rare 127-unit industrial complex totaling 481,038 square feet in Riverside, Calif. The seller was AEW Capital Management L.P., which sold the property on behalf of one of its separate account clients.
The property, which is located at 1600-2060 Chicago Ave. and 1614-1616 Marlborough Ave., will host the headquarters of MCA Realty’s recently launched property management arm, MCA Property Management Inc. The branch will manage the new acquisitions, as well as local assets in the investment firm’s existing portfolio.
“The sheer size of this complex makes this acquisition somewhat unique in this asset class,” noted Mattox, who explained that the property consists of 17 buildings and 127 units situated alongside Chicago Avenue in the growing Hunter Industrial Park neighborhood.
Mattox also added that quality multi-tenant industrial buildings of this size, caliber, and location are extremely difficult to find and that the asset’s location at the convergence of three major freeways in the area combined with the strength of the Inland Empire market make this property an ideal candidate to attract new incubator industrial tenants.
Upon closing, the industrial buildings were 76 percent occupied. MCA Realty is now planning an extensive renovation of the vacant suites in order to make them more attractive to potential tenants.
“Further, we plan to increase the ratio of industrial to office space in the complex by converting some of the existing office suites back into industrial space. Currently there are a handful of vacant office units on Chicago Avenue that we will convert into industrial units in order to accommodate the strong demand for small industrial space in this market,” Mattox commented.
He also noted that re-tenanting costs for the small, incubator industrial spaces are significantly lower than for other product types, which will reduce turnover costs and increase net operating income for the property.
Gary Stache, Anthony DeLorenzo, Michael Kendall, and Darla Longo of CBRE assisted MCA Realty in this transaction. Amos Smith of Walker & Dunlop arranged the acquisition financing for MCA Realty with MidCap Financial.
In a separate deal, MCA Realty also acquired a 91,326 square-foot, two-tenant industrial building in Temecula, Calif. The purchase price was nearly 6.3 million or $68.87 per square-foot.
A local San Diego family was the seller of the property, which was 47 percent occupied by HVAC manufacturing company Quiet Cool during acquisition. However, MCA Realty secured a lease with Deco Breeze during escrow that brought the property to full occupancy at close of escrow.
“The Temecula industrial market is extremely tight, with sub 3 percent vacancy, making space between 20,000 to 80,000 square feet very difficult for tenants to find,” said Mattox. “The exceptionally strong demand for industrial product in the area made acquiring this asset the right decision for MCA Realty.”
MCA Realty is now planning to implement a series of capital upgrades to the property, which is located at 43350 Business Park Drive.
Scott Stewart of CBRE and Gordon Mize of Lee & Associates assisted MCA Realty in this transaction. Steve Hollister of NorthMarq arranged acquisition financing for MCA Realty with Copper Point Mutual Insurance Company.