Buyers Invest $27M in Inland Empire Deals

ONTARIO, CA-Three buyers have paid $27.15 million for office, industrial and retail properties in three separate transactions that have closed here and in Lake Elsinore in recent weeks in a series of Inland Empire deals. The properties that changed hands included a two-building multi-tenant professional office complex totaling 125,497 square feet at Ontario Gateway, a 45,560-square-foot retail building fully occupied by L.A. Fitness in Lake Elsinore and two industrial and flex buildings totaling 129,690 square feet at the Business Park at Belmont in Ontario.

In the Ontario Gateway sale, the Lee & Associates Investment Services Group reports that an investment group bought the two buildings from Jefferson-Pilot Investments Inc. for $8.75 million. Ontario Gateway "was on the market for just three months and drew 15 offers, reflecting the high investor demand,” said Edward Indvik, vice chairman of Lee ISG. The Lee team, which represented both the buyer and the seller, included Indvik and Lee ISG founding principal Matthew Sullivan along with senior vice president David Mudge and associate Julia Corona-Thompson of the Lee & Associates Inland Empire Office Group in Riverside.

Sullivan noted that the majority of interest received was from high-net-worth individuals as well as off-shore investors. “We were also able to stabilize the property prior to taking it to market, and that helped our marketing efforts as well,” Sullivan added.

Ontario Gateway I, at 2151 E. Convention Way, includes 73,974 square feet, and Ontario Gateway II, at 2143 E. Convention Way, totals 51,523 square feet. Both buildings are two stories with freeway orientation. Tenants include SoCal Water, California Department of Consumer Affairs and the state’s Department of Health Services and Manpower Inc.

“We reviewed all of the leases before we took the building out to market, “ Mudge said, “and, once we adjusted rates so that they fell in line with the market, we were able to stabilize the existing tenant base and attract several new tenants.”

In the Lake Elsinore sale, Faris Lee Investments of Irvine reports that the property sold for $8.8 million at a cap rate of 8.5%, the lowest for a fitness property in Southern California since 2009, according to Faris Lee. Built in 2007, the center is situated on approximately 4.27 acres and is located at 18550 Dexter Ave., with full frontage and visibility from Interstate 15 directly off the Central Avenue exit.

Richard Walter, president and Chris Tramontano, director at Faris Lee Investments, represented the seller/developer, Aliso Viejo-based California Grand Investments LLC in partnership with Lake Fitness LLC. The buyer, a private trust from Villa Park, was in a 1031 exchange.

Tramontano said that the cap rate is significant because of the Inland Empire location and single-purpose nature of the property. "Even when you compare Los Angeles and Orange County markets, it’s still the lowest rate for a single-tenant fitness facility in Southern California since 2009,” Tramontano said.

Walter said that Faris Lee's knowledge of the lending environment indicated that obtaining a loan on the asset would be extremely difficult for a buyer. Before putting the property on the market, Faris Lee relied on its lender relationships to secure a loan with more favorable terms than anything else available, Walter said.

The totaled $6.1 million at a 6.5% interest rate for a seven-year term. The loan terms were also a factor that allowed Faris Lee to garner an aggressive sale price on the property, Walter said.

Tramontano added that, in addition to the favorable loan terms, "The property offered the buyer a strong tenant with a 15-year, triple-net lease, and the substantial intrinsic value of the excellent freeway-adjacent location.” The property, which attracted eight offers, includes an indoor swimming pool and 228 parking spaces.

In the Business Park at Belmont sales in Ontario, Panattoni Development Co. sold 1110 S. Mildred Ave., a 101,690-square-foot building to Office Master Inc., and 1220 E. Belmont St., an approximately 28,000-square-foot building, to KeKa LLC, for an aggregate value of $9.6 million. Panattoni was represented by Milo Lipson and Roger Rhoades, senior vice presidents, and Michael Arens, associate, all of the Grubb & Ellis Co. Industrial Group.

Lipson said that owner-user sales such as these "have been a prominent trend in the local real estate market and have kept the momentum going for the past 18 months of the downturn." Since receiving the listing in December 2008, the team has sold five freestanding buildings and three condo units to owner/users, and has leased one freestanding building.

The business park, near Ontario International Airport, includes six freestanding industrial buildings that range from 23,665 to 101,690 square feet. Additionally, the property includes two flex condo buildings located at 1115 Grove Ave. and 1175 S. Grove Ave., of 17,091 and 13,599 square feet of space, respectively. The buildings are divided into nine individual units that can be sold or leased.