In partnership with Sequoia Capital, Kearny acquired a 52-acre parcel in Moreno Valley in Riverside County in October 2013 for $19.4 million. A portion of the site is leased to El Dorado Stone through spring of 2015.
The industrial sector is very competitive and “priced to perfection” unless there are significant challenges with an asset. What attracted Kearny to this site was it’s perfectly rectangular shape which allows for a very efficient large distribution building, the ability to access the site from all four sides, and the fact that on and off-sites improvements are complete with the exception of minor road improvements and off-site drainage. The challenge is that the proposed development required the processing and approval of an EIR.
Kearny completed the EIR and all entitlement approvals ahead of schedule and on-budget. Successfully completing entitlements in California ahead of schedule should be an Oxymoron! The approvals garnered are for a state-of-the-art LEED certified 1,100,000 sf cross-dock distribution building. To put this in perspective, thirty football fields could fit within the building.
Almost all development projects have unexpected challenges (think Murphy’s Law). Moreno Valley was no exception. El Dorado Stone had a lease on 2/3′s of the site thru 2015 and an option to extend on a smaller portion of the site. Our underwriting, including a tenant interview, left us confident that the tenant would not exercise their option. The unexpected happened and the tenant exercised their option for 1/3 of the site – the worst outcome. Indicative of Kearny’s problem solving abilities, Kearny was able to secure a 20-year ground lease on the Orange Avenue site, successfully process a Mitigated Negative Declaration and complete $5mm of improvements needed for El Dorado Stone’s use and lease the site to El Dorado Stone. El Dorado Stone has a better site, with freeway visibility and lower rent – a true Win-Win and Kearny was able to free up the 52 acre Moreno Valley site for development.
Kearny is currently marketing the entitled site as a “forward sale.” Grading and Building Permits are expected June 2016.
Architect: HPA, Inc.
Engineer: Webb Associates
EIR: T&B Planning