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IRVINE, CA-A Southern California investment- and development-company that has historically focused on office and retail projects in its home territory and Phoenix has made an aggressive move into the Southeast industrial market. Crown Realty & Development Corp. has made two buys totaling more than $150 million and expects to close on a third shortly.

The Irvine-based company entered the arena at the end of 2007 with the $115 million purchase of a 13-building office, flex and industrial portfolio in Durham, NC’s Imperial Center Business Park. It followed quickly with the $36 million acquisition of two distribution properties in Memphis. Company CIO Scott San Filippo reports a distribution center in Charleston, SC is in contract for $28 million.

The escalating cost of California and Arizona office and retail properties prompted the shift, the Crown exec tells GlobeSt.com. Lower land and business costs, growing population and expansion at major East Coast ports drew the company to the Southeast, but the determination was made only after careful study.

“We looked at US as a whole, then individual parts and regions to figure out which area had the greatest potential,” he says. “Many developers will find the deal, then underwrite the market around it. We approach the situation from the opposite direction. We underwrite the market, then go find the deal.”

According to San Filippo, of the nation’s 380 major metropolitan statistical areas, 80 are growing and the remainder are stagnant or shrinking. Of the 20 with strongest demographic projections, he says the majority are in the Southeast.

“We just read to see where projected growth was and where the most stable growth was taking place,” he explains. “We looked to see where the cost of doing business and cost of living are at or below the national average, then to see which areas had a good quality of life and good feeder schools. It turned out to be the Southeast.”

Depending on market conditions and availability of capital, San Filippo says Crown anticipates acquiring a total of $300 million to $500 million of properties over the next 18 months. Most will be core and value-add industrial properties in the Southeast. Initially, the company plans to concentrate on investment rather than development.

“We believe at some point we will add our development group to our mix, but as of yet we’ve not done that,” he says. “Development is a higher risk, and we want to get comfortable with the market first.” Despite the aggressive entry, San Filippo maintains Crown is content to remain a comparatively small player for the time being. “We’d like to spend a little more time getting acquainted with the region and making ourselves known rather than taking on too much,” he says.

San Filippo calls the Imperial Center portfolio a premier example of the kind of property Crown is looking for. He describes the target product as “high-quality, well-located, functional real estate.” He lists the target markets as the Piedmont-Interstate 85 corridor from Atlanta through Charlotte and Raleigh-Durham, NC, the Memphis-Nashville area and north Florida. “We particularly like the Southeast port markets of Charleston, Wilmington, Savannah and Jacksonville,” he says. “We will also be spending time looking at other markets in Florida and a few in Texas.”

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