Complex Industrial Sale Stirs Interest

LOS ANGELES—Martin Properties Inc. has closed on the purchase of an 111,703-square-foot industrial building in Thousand Oaks. The investor purchased the property after a lengthy 11-month escrow period, which allowed the seller, PEGH Investments LLC, to complete a 1031 exchange purchase on another property. Directly after the sale closed, Easton Baseball/Softball signed a 10-year lease at the property.

This was an unusual and complex transaction, because typically in a 1031 exchange, the seller will dispose of an asset before finding a new property to purchase. In this case, it was just the opposite. PEGH Investments found a purchase property before deciding to sell this asset. To make things more complex, the seller of the PEGH Investment's upleg property was also in a 1031 exchange, causing a delay that led to an 11-month escrow period. “This was kind of unique sale because we needed to find a buyer, but couldn't close escrow until the seller was in this window to exercise his 1031 exchange,” Mike Tingus, a principal at Lee & Associates at L.A. North/Ventura office, tells GlobeSt.com. “We were in escrow for 11 months, and that is really unusual. There were a lot of interested investors in the property, but our hands were tied because of the conditions of the 1031 exchange.” Tingus represented both the buyer and the seller in the transaction along with his colleague Grant Fulkerson.

Located at 3500 Willow Lane, the property traded hands for $10.4 million. “The market value probably went up 10% to 15% while we were in escrow, but the sales price really doesn't reflect that,” says Tingus.

Martin Properties originally planned to convert the property into mini-storage, and was waiting until the end of the escrow period to obtain the necessary permits. In the meantime, Easton lost another property nearby to a larger tenant, and were in urgent need of a building. “For Easton, the building is perfect,” says Tingus, adding that there are several current and former professional baseball players living in the surrounding areas. “There are a lot. Easton is great at the composite and aluminum bats, but they are going to begin manufacturing wooden bats out of this location, which are really only used in adult softball and major leagues. This is an opportunity for Easton to bring in professional players to use and test their bats, and hopefully buy their bats.”

Easton signed a 10-year lease at the property. It plans to remove 20,000 square feet of upper floor space to make a warehouse where the company can install batting cages. The removal of the floor space reduced the building's square footage to 90,000 square feet. Easton is the only tenant in the building. “It was a win-win, and it really felt like three or four deals,” says Tingus. “Those are always good deals.”

The Conejo Valley has seen tremendous activity, and is one of the tightest industrial markets in Southern California. Recently, an office property in Thousand Oaks sat on the market for two years. The owners eventually converted the building into an industrial flex property, and it sold immediately. This is just another example of the high demand for industrial in that market.