Westside Business Centre
In June 2000, Kearny acquired 56 acres of Westside Business Centre in Temecula, for $7.6 million ($3.14 psf). The acquisition, Kearny’s second in Temecula, followed the successful absorption of the vacant 42301 Zevo Drive building. The 56 acres were the last remaining in Westside Business Centre, a 385-acre park located strategically in south Riverside County with direct I-15 access via Winchester Drive. Absorption of the property was completed in five years.
Within four weeks of purchasing the land, Kearny signed a letter-of-intent with The Scotts Company for their 412,580 sf build-to-suit requirement. Kearny sold The Scotts building in March 2002 for $26.8 million ($64.96 psf), which set a record per square foot price for an industrial facility in Riverside County.
Land sales included 4.75 acres in November 2002, 8.5 acres in January 2004, 6.7 acres in May 2004 and 5.4 acres in March 2005. The final sale at $10.25 psf set the high water mark for an industrial lot sale in the Temecula Valley.
In underwriting land development opportunities, Kearny generally assumes that 50% of a project will be sold as finished parcels to developers and/or users over a reasonable time period, and 50% of the property will be developed with speculative and build-to-suit projects. Actual execution of Kearny’s business plan varies as the market and risk/reward tradeoffs dictate, but experience has taught us that a combination of land sales and development, both build-to-suit and speculative, is a prudent way of balancing the risk and rewards of land development.
At Westside Business Centre, 45% of the property (25 acres) was sold to developers via land sales and 55% (31 acres) was developed and sold. 22.5 acres were developed as a build-to-suit for The Scotts Company, and speculative development of Remington Business Center was completed on the remaining 8.3 acres.