Non-Land-Lease Offices Rare in Cerritos

CERRITOS, CA—A private investor has purchased Carmenita Corporate Plaza, a 68,779-square-foot office property from an affiliate of Cohen Asset Management. Cerritos office properties are often on 70- to 80-year land leases; however, this property was not on a land lease, and as a result, attracted a fair amount of interest. The property traded hands for $19.7 million, which is a bit of a premium for the space.

“There has been a fair amount of activity in Cerritos. There is mostly institutional ownership in Cerritos, like this property,” Paul Jones, first VP at CBRE, tells GlobeSt.com. “What made this deal unique is that this property is not on a ground lease. For a private trade buyer, understanding a ground lease can be confusing. There was interest from other buyers, but this buyer came in quickly and at a compelling number that our seller was willing to go down the path with them. The buyer paid a little bit of a premium for us to preempt the process.” Jones represented the seller in the transaction along with vice chairman Kevin Shannon and senior associate Blake Bokosky.

The property is 100% occupied by Infinity Property & Casualty Corp., which has building signage and good visibility from the freeway. Although the tenant has only three years remaining on its lease term, the buyer was confident that it would renew because of the signage and its long-term occupancy. “From a location standpoint, Cerritos is directly in the middle of Orange County and L.A., so they can pull employees from many different areas,” Jones adds. 

The seller decided to dispose of the asset because of the peak market conditions. “The wind is behind us and it is all green lights ahead, so it is definitely a good time to monetize product right now,” says Jones. “When we went to market, we thought it would a good likelihood that it could be a 1031 buyer or a foreign buyer, and in this case it was both.” The property attracted ample interest, and not only because it lacked a land lease. “It had a credit tenant, freeway identity and most importantly, it offered a healthy yield from cap rate standpoint. Plus, it was financeable,” says Jones. Although Jones received multiple offers on the property, this particular buyer came in with aggressive pricing to fit his 1031 exchange time line. The buyer used recourse debt with one of their relationship banks to purchase the property.

The industrial market in Cerritos is equally as tight. Giant Bicycle, an industrial user, just relocated to the nearby La Mirada market because it needed more space and had limited options available in Cerritos.