A $40 Million Dollar Industrial Deal Has Closed

A partnership of Kearny Real Estate Company and Morgan Stanley Real Estate Fund V has sold 1.4 million square feet of industrial and manufacturing space within its Century Business Center in Hawthorne, Calif.  to Buchanan Street Partners and Zelman Development Co. for $40 million. Buchanan Street Partners provided $10.2 million in joint venture equity for the acquisition.

Located in the in one of the premier industrial submarkets in the western U.S., the entire space is leased by Vought Aircraft Industries, a leading manufacturer of aerostructures and aviation components. The sale involves one five-story 254,000 square-foot office building and six industrial manufacturing buildings including a one million square-foot facility used by Vought as the sole manufacturing center of fuselage panels for Boeing’s 747 aircraft.  This plant is considered “mission critical” for Vought in light of increased orders for Boeing’s new 747-8 which represents a robust fuselage backlog for the company. The aerospace manufacturer recently renewed its lease through 2015. The 43-acre property is one of only 10 industrial sites in the Los Angeles region with more than one million square feet on 40 acres.

“The acquisition of this property presented a unique opportunity for the partnership due to its superior location, favorable acquisition basis and strong tenancy,” says Tim Ballard, president and chief investment officer of Buchanan Street Partners. “Century Business Center represents one of the largest contiguous industrial sites in Los Angeles and is a “ground zero” manufacturing and distribution location, as evidenced by the areas 4.4 percent vacancy rate despite today’s challenging economy. We are very pleased to be partnered with an operator with Zelman’s skill, reputation and track record.”

“With this investment we can benefit from a stable cash flow stream over the next few years as the real estate market heals, and take advantage of the flexible redevelopment entitlements in the event Vought were to vacate the property,” adds Paul Casey, co-president of Zelman Development Co.  “Buchanan delivered on its commitment in a difficult real estate market and their thorough underwriting and rigorous due diligence will benefit both the investors and the partnership alike.”
Kearny acquired the site in 2005 from Vought, a subsidiary of The Carlyle Group, and leased back the Western portion to the Dallas-based company.  In repositioning the property as Century Business Center, Kearny successfully marketed the remaining 15 buildings on the Eastern portion totaling 785,000 square feet to a variety of users creating more than 500 jobs in the community.

Kearny also razed approximately 350,000 square feet of obsolete buildings and aircraft hangars on the eastern half of the site to make way for 203,000 square feet of new industrial development in the form of small industrial buildings ranging from 5,700 square feet to 20,000 square feet. The new development is currently 64 percent sold or leased.

In the past five years, Kearny has been responsible for attracting and retaining more than 4,000 jobs in the South Bay through the redevelopment of the Vought Manufacturing Facility and former US headquarters for Nissan North America, which was left vacant after the automaker relocated from Carson to Tennessee in 2006. The 42-acre complex located at 190th and Figueroa Street, which is now known as Kearny South Bay Business Park, is now 100 percent occupied by businesses in fashion, finance, high-tech manufacturing, automotive and health care services.

Kearny was represented by Jeff Kernochan of Fisher Corporate Real Estate and Bill Palmer of The Palmer Team.  Buchanan Street Partners and Zelman Development were represented in-house.
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