Mesa West Lends $88M on Newly Built Industrial Asset Outside LA
Mesa West Capital has provided just under $88 million to developer Dedeaux Properties to fund its acquisition and lease-up of a 1-million-square-foot industrial asset in Riverside, Calif., according to information from Mesa West.
The five-year, floating rate financing was made to a joint venture led by Dedeaux.
The seller is Hillwood, a major owner and developer of industrial assets, according to a source with knowledge of the deal; it completed the property on July 11, 2019, according to information from Mesa West. It was delivered to market as a vacant asset, so the loan was capitalized with a future funding component for leasing costs.
Dedeaux, which specializes in the investment and development of logistics assets, plans to lease the property to a single tenant on a long-term basis.
Colliers International’s Ian DeVries and Chris DeVries marketed the sale of the property, representing both the buyer and seller. The pair is also handling the leasing efforts.
“The Inland Empire is one of the top industrial markets in the nation with low vacancy rates, limited developable land, and significant barriers to entry resulting in high demand,” Mesa West Vice President Danielle Duenas said in prepared remarks. Duenas originated the loan out of Mesa West’s Los Angeles outpost.
“These strong market fundamentals coupled with an experienced local owner and operator of a newly constructed institutional-quality building made this a compelling and unique opportunity,” Duenas added. She said Mesa West is continuing to eye financing opportunities for industrial assets, “a space where bridge financing has not traditionally been utilized given the construction to [permanent] dynamic and competitive landscape for this asset class.”
The newly constructed, 1,012,995-square-foot warehouse and distribution center is situated on 52 acres at 6275 Lance Drive, within the 920-acre master-planned Sycamore Canyon Business Park in the Sycamore Canyon area of Riverside. The cross-dock-style property features 147 dock-high loading bays, with 36-foot-high clearances and 710 feet of depth within the buildings.
“We are very excited to close on this asset and continue our aggressive growth,” Dedeaux COO Alon Kraft said in a prepared statement at the time of the August 5 announcement of the purchase. “This investment further highlights our commitment to high quality, strategically located logistics space in our target markets.”
The property also sports a built-to-suit office, four ground-level loading doors and two secured truck courts that include 192 trailer parking spaces. The property has direct access to Interstate 215 and California 60 highway, which are key routes into Los Angeles and San Diego. The route, California 60, feeds into Interstate 10, which is a direct artery into Phoenix, Ariz.
This acquisition is the second of a two-building complex, totaling around 1.4 million square feet, that will be called Dedeaux Sycamore Canyon Distribution Park. Dedeaux recently purchased an adjacent site through a separate transaction.
“Dedeaux Sycamore Canyon Distribution Park is the latest in our execution on a pipeline of approximately two million square feet of development and acquisition activities that range from cold storage facilities in central Los Angeles to truck terminal developments in the Inland Empire West to trailer parking yards in Southern California’s South Bay,” Dedeaux CIO Matt Evans said in a prepared statement at the time of the August 5 purchase.
The Inland Empire region — home to Riverside — experienced robust growth and capital market activity in the second quarter as demand for industrial space remained high in the area and space for new construction dwindled; that’s pushed land prices starkly higher, according to a second quarter market report from CBRE.
Average prices for remaining land for industrial development have soared 20 percent to $30 per square foot in the last year as of the second quarter; that’s up 40 percent from two years ago, according to CBRE.
The strong demand in the region — driven by insatiable big-box demand for space greater than 300,000 square feet — pushed overall vacancy down to 3 percent, which is down 60 basis points (bps) from the first quarter and is the lowest figure seen in this elongated cycle, according to CBRE. Eight big-box deals, totaling 4.7 million square feet, cut vacancy in that sector in the eastern section of the Inland Empire by a whopping 170 bps.
Positive net absorption reached over 11.2 million square feet on the year in the second quarter, which is up just under 7 percent from the same time last year, as per CBRE’s report. The report indicated that as more big-box users flock to the region in search of massive chunks of warehouse and distribution space — like Dedaux’s complex — the market’s positive fundamentals are expected to balloon again in 2019.