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REA
February 22, 2017  

DRA Team to Roll Out Big Industrial Bundle

A partnership between DRA Advisors and Westcore Properties plans to market an industrial portfolio, heavily concentrated in Northern California, that could fetch $600 million.

The package encompasses nearly 100 properties totaling roughly 9 million square feet, including some 7 million sf in the Sacramento area. The marketing campaign will likely emphasize the opportunity to immediately achieve scale in that secondary market. Eastdil Secured has the listing.

The rest of the portfolio is in the St. Louis and Indianapolis markets. The properties will be pitched as a package, and it’s unclear whether the seller would consider splitting it up by market or other groupings.

The multi-tenant warehouses are over 90% leased and have a weighted average remaining lease term of about four years. Because of their relatively small sizes and locations amid population centers, the buildings could tap into the push by e-commerce firms to position goods for quick delivery to customers.

In-place rents are below the market averages, providing potential to boost income by raising rates upon lease rollover, as well as by increasing occupancy. Sacramento has 106 million sf of warehouse space that was 93.4% leased at yearend, with an average asking rent of $3.35/sf, according to JLL.

The listed properties made up the bulk of an 11.1 million-sf portfolio that New York-based DRA and San Diego-based Westcore bought for $597.8 million in 2012. The seller was J.B. Co., whose founder, developer Joe Benvenuti, died that year.

The original package had 8 million sf in Sacramento, 1.9 million sf in St. Louis and 1 million sf in Indianapolis. The capitalization rate on the 2012 trade was about 6%. However, the portfolio’s occupancy rate then was just 78%. The DRA partnership has since sold off some properties and boosted the value of the remainder by increasing occupancy and moving the needle upward on rents.

DRA is the equity partner in the partnership. At the time of the Benvenuti deal, DRA’s interest was believed to be 75%, while Westcore owned 25%. That transaction was one of DRA’s first big pushes into the industrial sector, where it remains active. Last year, DRA agreed to pay Boston-based Cabot Properties roughly $1 billion for a 20 million-sf portfolio.