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Penwood Select Industrial Partners II, L.P.

CASE STUDY 1424 S. Raymond Avenue

Location: Fullerton, CA

Acquisition Date: July 2009

Sale Date: February 2010

Strategy: Rehabilitation

Property Description:

  • Includes 14.84 acres with 1,360 feet of frontage on South Raymond Avenue.
  • Three industrial buildings built between 1957 and 1968 with 198,020 square feet of space.
  • Located 300 feet north of the four-way SR-91 interchange with South Raymond Avenue.
  • Property has rail service and significant excess land for trailer storage or outside storage of goods.

Rationale for Acquisition:

After targeting specific manufacturing companies with attractive real estate holdings in the Los Angeles area that were negatively impacted by the recession, Penwood and its operating partner identified the 1424 S. Raymond Avenue property as a viable investment opportunity. The asset is a strategically situated industrial property. It offers an in-fill location with direct freeway access to SR-91 and has proximity to I-5 and SR-57 in the heart of the North Orange County industrial submarket. This highly favorable location makes it ideally positioned as a hub for manufacturing and distribution throughout Orange County and the Greater Los Angeles area.

Investment Strategy:

The property was acquired in July 2009 at pricing last achieved in 1997. The investment plan was to refurbish the 151,000 square-foot and 39,000 square-foot buildings then lease them at a significant discount to market rents. The location and site layout allowed the Partnership to entertain multiple exit strategies and provided the opportunity for considerable up-side potential, as the markets recovered. The potential exit strategies included: (1) rehabbing, leasing, and selling the property to an investor, (2) selling to a developer, (3) selling to a user, or (4) redeveloping the site with state-of-the-art industrial space then selling the finished product to a user or an investor.

Results:

The investment strategy was executed with attractive results. Due to the desirability of the location, multiple offers for the asset were received within the first six weeks of ownership. The highest and most attractive offer for the site was provided by a transportation company that distributes electronic components throughout Southern California, Nevada, and Arizona. The property was sold sooner than expected but at a significant return and multiple for the investors in a very difficult economic environment.

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