Pacific Industrial, a privately held industrial development and investment firm, has completed the largest non-portfolio industrial property disposition in California in the past 24 months with the sale of Sierra Pacific Center, a two-building, 1,495,208 square-foot, Class A+ industrial facility in northern Fontana, the company said in a news release.
This property, which is fully leased to LG Electronics and FedEx, is one of the first ground-up developments completed by Pacific Industrial. The firm sold the asset to an institutional life insurance company for a total consideration of $213.5 million.
"This is a milestone transaction that represents the remarkable investment potential of spec industrial developments when they are done well," said Dan Floriani, partner and co-founder of Pacific Industrial. "By developing this asset with a long-term-hold mindset, we thoughtfully designed each detail, resulting in a property with a proven track record of attracting major credit tenants who value best-in-class, Class A+ features."
Pacific Industrial developed the asset in partnership with an international institutional investor, and continues to partner with institutions and pension funds on additional development projects throughout California.
"We had the opportunity to sell this 1.5 million square-foot property at a record cap rate of 3.68 percent, and we are simultaneously developing 1.5 million square feet of new best-in-class industrial properties in other Southern California markets," said Floriani. "This activity speaks to a continued institutional appetite for industrial developments where tremendous value creation with the right developer is not only possible, it's been proven."
Floriani said that the buyer of Sierra Pacific Center will also benefit from this value creation strategy.
"This is a stable, cash flowing asset in an exceptional location with investment grade tenancy and key features that are unlike any other industrial property in the Western U.S., giving the buyer a property that can be profitably held for the long term," said Floriani.
Unique features built into the property include three percent skylight coverage delivering 50 percent more natural light than the industry standard of two percent; electric vehicle charging stations; and extremely large, 100 percent concrete truck courts with depths up to 430 feet. Average truck court depth in a Class A industrial facility is 185 feet.
"This is a substantial core investment property in the top industrial submarket in the nation," said Jeff Chiate, executive managing director of Cushman and Wakefield's National Industrial Advisory Group, who represented Pacific Industrial in the disposition. "The Inland Empire West market posted the most lease transactions above 500,000 square feet in the nation last year. Market fundamentals in this region continue to be exceedingly strong, with vacancy rates at a record-low 2.0 percent. With this knowledge and a deep expertise in investment-grade industrial property, our team recognized the true potential in the asset, and we were able to attract a competitive pool of high-quality buyers."
Completed in 2016, Sierra Pacific Center is adjacent to the Route 210 Freeway and within a 20-mile radius of seven major freeways. The property is located at 5565 and 5885 Sierra Avenue.