Hines Sells Orange County Industrial Asset for $114M

515 E. Dyer Road. Image courtesy of Hines

Hines has turned a big profit in the high-demand Orange County, Calif., industrial market with the trade of 515 E. Dyer Road, an approximately 400,000-square-foot asset in Santa Ana. The company sold the logistics facility for $113.5 million, twice the amount it paid for the property just three years ago, to MDC Coastal 13 LLC, according to Orange County records.

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Hines had not necessarily planned a short-term hold of 515 E. Dyer; the timing was simply right to sell. “Industrial product has never been in higher demand, particularly in the infill markets. Cap rates are at all-time lows,” Tom Lawless, director with Hines, told Commercial Property Executive.

In December 2017, Hines had purchased 515 E. Dyer from Turner Development for approximately $57.1 million. The company immediately commenced a renovation and repositioning of the building, which had previously been home to Royalty Carpets, transforming the 1950s-era structure into a premier industrial facility. And in 2019, in the largest lease transaction of the third quarter of that year, Amazon leased the newly transformed property in its entirety under a long-term agreement that will keep the e-commerce giant in place through 2034.

While Hines had taken out a $47.8 million, five-year loan on 515 E Dyer in January 2018, the company sold the asset unencumbered by existing debt. Cushman & Wakefield, which had represented Hines in the off-market purchase of 515 E. Dyer three years ago, represented the company in the sale of the property and stood in for the buyer in the transaction as well.

Grow West

Courtesy of the boom in e-commerce activity, the industrial real estate sector is on fire; however, Hines has more in mind than capitalizing on the current seller’s market. “Hines has aggressive plans to acquire and develop industrial in Orange County and broader Southern California,” Lawless said. “Orange County is a robust industrial market with very low vacancy and minimal new product deliveries every year.”

The average vacancy rate in Orange County is a mere 2 percent, according to a fourth quarter 2020 report by Cushman & Wakefield. The market was not impervious to the initial impact of the Covid-19 pandemic, but it was quick to rebound. “The Orange County industrial market started the year off strong during the first quarter, took a hit in the second quarter, then roared back in the second half of the year,” according to the Cushman & Wakefield report.