Case Study

Summary

Huntwood Logistics Center is located within the I-880 Industrial Corridor of the East Bay, at the northwest corner of Huntwood Avenue and Whipple Road in Hayward, CA. The property is situated upon 14.9 acres of land consists of one large warehouse building totaling 321,800 SF. The city of Hayward is strategically located at the center of the Bay Area between the Port of Oakland (18 miles), the Oakland International Airport (14 miles), and San Francisco International Airport (25 miles). The project benefits from 30’ clear height and a large yard area for trailer storage. Given the overall size of the property, it is one of the largest logistics facilities of its kind in the East Bay.

Situation

  • The property was developed by Trammel Crow Company in 1983 in two phases for Baxter Healthcare.
  • In 2003, a private investor acquired the property vacant from Baxter Healthcare’s predecessor for $12.2 million.
  • Shortly after closing, the property was leased entirely to Mohawk Carpet Distribution.
  • For several years, Orchard Partners made unsolicited proposals to acquire the property directly with the owner, and separately, got to know the owner by selling them a warehouse building in Hayward.
  • In the middle of 2011, the owner became aware that Mohawk intended to vacate the property and was seeking to sublease the property.
  • As a result of the significant deferred maintenance of the property coupled with releasing costs, the owner made the decision to market the property directly to a few prospective institutional buyers.
  • In anticipation of seller placing high value on closing with no price adjustments, Orchard Partners advanced its due diligence early in the process so as to give the seller assurance.
  • Although our offer was not the highest price, the seller selected Orchard Partners for the following reasons:
    · relationship and trust;
    · significant amount of property due diligence performed;
    · ability to go non-contingent within five business days;
    · cooperation with its 1031 exchange requirement.

Results

  • Concurrent with its speculative due diligence, Orchard Partners confirmed there to be a scarcity of available alternatives for large warehouse users within the I-880 Industrial Corridor.
  • Orchard Partners’ had assumed that Mohawk would eventually vacate the property entirely, and hired a broker to proactively solicit interest on the part of a few large corporate logistics requirements, including CEVA Logistics.
  • Orchard Partners developed several re-tenanting scenarios of the warehouse building prior to due diligence, but determined that the highest value would be achieved through marketing it to a single user.
  • Prior to closing, Orchard Partners confirmed that it had adequately budgeted for deferred maintenance of the property, including truck court repaving, renovation of office space, demolition of mezzanine storage area, roof replacement, seismic retrofit, and upgrade to ESFR sprinkler system.
  • Following closing, strong interest to lease the entire building continued, resulting in a full building lease to a large corporate logistics user, CEVA Logistics.