Deal for Refinery Latest in Push for Industrial Property

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Deal for Refinery Latest in Push for Industrial Property

By DANNY KING

Staff Reporter

Televangelist Pat Robertson has struck a deal to sell a portion of the Powerine Refinery site in Santa Fe Springs to an Irvine-based developer.

CENCO Refining, the company formed by Robertson when he acquired the 100-acre site with the intention of reopening refining operations, is in escrow on a 22-acre section of the site with Sares-Regis Group.

While terms of the deal weren’t disclosed, Mid-Cities industrial real estate sources estimate the purchase at about $11 million.

The land being sold by CENCO is free of environmental contamination. But the remaining acreage, for which the two companies are in discussions for a joint-venture development, will need extensive clean up. That could cost anywhere from $3 million to $15 million and will take two to three years, according to Lowell Morse, CENCO’s president and chairman.

Robertson’s efforts to revive refining at the site were dealt a setback three months ago, when a Federal District judge blocked the permitting process that would have allowed CENCO from reopening the site for crude production. Robertson’s company paid $80 million for the site in 1998.

The Robertson deal is perhaps the clearest indication of demand for industrial space in the gritty town near the Ports of Los Angeles and Long Beach.

CENCO had 23 offers when it marketed the 22 acres now under agreement with Sares-Regis.

“There is a lot of money chasing very few investments out there,” said Ed Smith, a broker for Cushman & Wakefield of California Inc.’s Los Angeles South office.

“It kind of confirmed our decision to move in that direction,” Morse said of the decision to give up the fight to restart refining operations.

Minimal inventory

Santa Fe Spring’s location about 18 miles from the ports and just four miles west of the Orange County border coupled with its pro-business local government have made this area a prime target for industrial development. Roughly 80 percent of the nine-square-mile town city is zoned for industrial use.

But despite ample industrial zoning, a shortage of space has developed as a result of the area’s long history of oil production and its associated environmental problems.

Still, when parcels come available, plenty of takers line up.

NHK Laboratories struck a year-end deal for the purchase of a 27,000 square foot building on Florence Avenue just east of Norwalk Boulevard for $2.2 million, or $81.25 per square foot. HomeAmerica Distribution bought a 101,000 square foot building at 10506 Shoemaker Ave. for $6.6 million, or $65 per foot.

Real estate fund manager RREEF has a deal pending for 24 acres at the Breitbrun Energy Plant, on which it plans to develop industrial properties. The deal was valued at roughly $10 million.

Industrial buildings under 100,000 square feet are being sold in the $75 to $85 a foot range. Land not burdened with environmental problems is moving for $10 to $11 a foot, up 10 percent over the last two years.

“The market hasn’t changed so much but the investors’ appetites have changed because alternatives (retail, office) aren’t as attractive,” said Chris McGranahan, whose firm, McGranahan Carlson & Co. has developed 1.4 million feet of industrial space, mostly in Santa Fe Springs, since 1985. “I wouldn’t characterize it as being on fire, but it’s a solid market.”

The result is that whereas industrial property typically sells for about 130 times the rent it can garner, in Santa Fe Springs that number edges closer to 160.

“If I had another 15 buildings between 8,000 square feet and 80,000 square feet for sale, I could sell them all before they were finished,” said Clif Fincher, principal at Orange-based Lee & Associates, the leasing agent for the Mission Business Center on Los Nietos Road and Greenleaf Avenue.

Crude departure

With its continued industrial growth, Santa Fe Springs has pulled away from its 80-year association with crude production. Bob Orpin, the city’s director of planning and development, said 250 acres of the city’s land are still used for oil production. Meanwhile, the town’s population of 16,000 swells five-fold during the workday.

But the history of oil production puts a cap on industrial property growth, as just about all of the remaining land is contaminated and in need of extensive remediation.

“All of the easy remediation has been done and we’re left with the hard ones,” said McGranahan, who estimated that remediating a field costs between $1 and $3 a square foot, while properly sealing an abandoned well can cost up to $85,000.

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