CIP buys San Gabriel Valley small-bay scarcity at $303 a square foot

The owner of an 11-building industrial and flex complex in the San Gabriel Valley, an affiliate of AEW, has sold it to Irvine-based CIP Real Estate for $60.7 million, about $303 a square foot for the 200,049-square-foot Walnut Tech Business Center, at Valley Boulevard and Lemon Avenue in Walnut. That per-square-foot price carries more information than the headline: the park is 92 percent leased across 109 industrial, flex-office and service-commercial suites running from 640 to 8,400 square feet.

City National Bank provided $42.9 million of acquisition financing arranged by JLL, roughly 71 percent of the purchase price, and the lender underwrote a 109-tenant rent roll at 92 percent occupancy, not the ground beneath it. CIP represented itself, while JLL's Patrick Nally, Evan Moran and Chad Solomon represented AEW.

CIP also has a $3.5 million capital improvement program planned for this year, roughly $17.50 a square foot, which suggests leasing and turnover work on a park that is already nearly full rather than any kind of redevelopment. The wager sits in the submarket, about a mile from the 60 Freeway and serving the City of Industry area, where small-bay industrial space is tightly supplied. Eric Smyth, CIP's chief executive, said in a statement that quality small-bay parks rarely come up for sale in Southern California and called the submarket strategically important within Los Angeles County.

The purchase extends a stretch in which CIP says it closed more than $200 million of industrial park transactions over the past 90 days across Dallas, South Florida and Atlanta, lifting its industrial portfolio past $2.5 billion; the company owns and manages more than 12 million square feet. The other trades were not priced publicly, so the $303 figure cannot be benchmarked against them, and what Walnut establishes is the asset profile CIP will bid for: small suites, many tenants, constrained infill.

As this publication has argued, industrial pricing in this cycle is a rents-and-scarcity trade more than a building trade, with the operator and the land basis carrying the value. Walnut is that trade in miniature — 109 leases that reprice one at a time in a submarket where new supply is hard to assemble, financed at a leverage level that assumes the rent roll keeps performing. By contrast, Los Angeles County's office market is still hunting a clearing price; the EY Plaza loan note we wrote about last week is the nearest thing to a print.

CIP has now spent a quarter buying across three Sun Belt markets and one Los Angeles submarket where land is the binding constraint, and the coastal trade is the one where scarcity, rather than scale, is doing the work. The next 90 days will show whether this was a single infill acquisition or the start of a coastal leg to the strategy — and whether City National writes the same 71 percent against the next one.