Charlotte Buy Not Start of Pattern for Westcore

"I wouldn't read it as an entrance into the region so much as following an existing relationship," says Westcore president and CEO Donald Ankeny. "The owner, now the tenant, is a group we have a relationship with. They asked if we were interested in buying their Charlotte facility, so we agreed to take a look."

The seller was Flextronics International USA Inc., an electronics manufacturing services provider that will continue to occupy the building under a 10-year lease signed with Westcore. In December, the company sold Westcore a 500,000-sf, nine-building manufacturing facility in Milpitas, CA. The deal also included a 10-year leaseback.

Westcore´s portfolio, which includes some three to four million sf of industrial space along with several million sf of office and retail properties, is confined largely to the West, including California, Arizona, Colorado and Texas. Prior to the Charlotte purchase, the company's only properties east of the Mississippi were a 24,600-sf industrial building in Milford, CT and a dozen or so gas stations in Illinois.

"In general, our focus is in on the Western US," Ankeny tells GlobeSt.com. "We like to own where we can get to our properties without having to take a red-eye." The fact Flextronics is the sole tenant and has self-managed the building to this point means Westcore will be able to manage the asset with minimal need to oversee it in person, he adds.

The exec does not rule out additional buys outside the West, but he says if they occur it will likely again be through existing relationships and not a conscious effort to penetrate new markets. He points out that an office portfolio acquisition made after the Flextronics deal in the final week of March includes a property in Cleveland, though the majority of properties were in San Francisco and San Diego. "We wouldn't target Ohio, but we bought this particular property in order to get the rest of the portfolio," he explains.

In general, Ankeny continues, Westcore looks very favorably on industrial properties, but he says current pricing levels make it difficult to justify many prospective acquisitions. "Everybody likes industrial," he says. "As an asset class, it´s very stable and in many markets demand is outstripping supply. But it´s also extremely competitively priced. It´s difficult to see how an acquirer is rewarded for the investment."

Though Westcore may hold the Charlotte property through the term of the Flextronics lease, according to Ankeny if it does it would be departure from the company's usual value-add pattern. "We're typically not a buy-and-hold owner," he says. "We look for well-located properties with good bones that we can re-tenant or rehab and sell for a good return. The Flextronics building does not fit the mold, but we got it for a good price and after studying the Charlotte market, we determined it made sense."