Westcore Seeks Big Profit on HP Warehouses

A Southern California industrial property, fully leased to Hewlett-Packard, is on the market with an expected price of $100 million almost quadruple what a Westcore Properties partnership paid to acquire it vacant last year.

The offering consists of two buildings totaling 1.4 million square feet in San Bernardino, Calif. At the estimated value of $71/sf, a buyer's initial annual yield would be below 5%, reflecting the intense demand for core warehouses in the Inland Empire, one of the nation's strongest industrial markets.

CB Richard Ellis is advising San Diego-based Westcore and its three partners: CT Realty of Aliso Viejo, Calif.; PCCP, a private equity firm in El Segundo, Calif.; and Behringer Harvard of Addison, Texas.

The property, known as the Cajon Distribution Center, was acquired last August from CB Richard Ellis Investors for $26.4 million. At the time, CB was under pressure to sell as debt on the property neared maturity. In a major coup, the Westcore group recently signed Hewlett-Packard to a triple-net lease of $3.54/sf that runs through 2019. Hewlett-Packard has credit ratings of A2/A/A+ from Moody's, S&P and Fitch.

The warehouses were built on a 63-acre site by Hillwood Investment Properties in 2008. Building 1, at 7140 North Cajon Boulevard, contains 672,000 sf, and Building 2, at 7010 North Cajon Boulevard, has 731,000 sf. Both have 30-foot ceilings. The property has immediate access to Interstates 15 and 215.

Leasing demand has been strong in the 400 million-sf Inland Empire industrial market, especially for large buildings. The average occupancy is 93.1%, and 95.6% for buildings over 500,000 sf. Average rents are $3.48/sf, a 40% increase since early 2010.

Industrial sales have been active in the Inland Empire. Last year, the market's average cap rate of 6.8% was the lowest in the nation, according to Real Capital Analytics, which tracks deals of $5 million and above. The market, east of Los Angeles in San Bernardino and Riverside Counties, had the third-highest sales volume in the country, at $1.1 billion.

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