By Jon Peterson
Jackson, Miss., -based EastGroup Properties Inc. has increased its East Bay industrial market presence with the purchase of the Wiegman Distribution Center II in Hayward for $7.5 million.
The 84,000-square-foot property is located at 31260 Wiegman Road. The seller was an entity affiliated with Los Angeles’ Cohen Asset Management Inc., which has held the property since it was constructed in 1998.
“EastGroup has owned properties in the Bay Area since 1996. The area is attractive to us because it meets our criteria for business distribution buildings located in infill submarkets where location-sensitive customers want to be,” Bill Petsas, an EastGroup senior vice president, said in an email response to a reporter’s query.
Petsas works out of the company’s regional office in Phoenix.
EastGroup thinks that its current Hayward portfolio has been a strong one. It already owns four buildings on Wiegman Road in Hayward with 263,000 square feet, according to its Web site, in addition to another 516,000 square feet in seven buildings near Crocker and Huntwood avenues.
“Our properties in the Hayward submarket have demonstrated strong occupancy and performance for us over the years. We expect this new acquisition to complement our existing portfolio,” Petsas said.
With the acquisition, the company owns a million square feet of San Francisco Bay Area industrial property, all of which is fully leased.
EastGroup acquired the Wiegman property in an all-cash transaction. The publicly traded real estate investment trust expects to earn a 5.75 percent yield, using generally accepted accounting principles. The space is fully leased to Sysco Guest Supply, which is fully owned by the Sysco Corp., and United States Container Corp.
The new owner would not comment on the length of the leases, which are at market rate.
Cohen sold the property to take advantage of the capital looking for investment opportunity akin to what the property offered: “We felt that it was a good time to sell given all the investment capital that has an interest in core and fully leased properties,” said Brad Cohen, president and chief executive of Cohen Management.
Cohen now plans to re-invest the proceeds in the Bay Area. “We have two properties in escrow that we could close on in the next couple of weeks,” Cohen said. The company already owns industrial properties in Newark, Fremont and near the San Francisco International Airport.
The overall industrial market in Hayward has been relatively flat over the first two quarters of the year, according to Colliers International. Vacancy climbed slightly from 11.3 percent to 11.7 percent in that time.
The report anticipates that vacancy rate to hold with some improvement toward the end of the year based on a continuing flight to value by Peninsula tenants that favor the Hayward and Union City submarkets because of the quality product and greater selection at relatively lower cost.
EastGroup would like to own more Bay Area warehousing and distribution properties. “We are interested in growing our portfolio in Hayward and Milpitas. We will evaluate properties in other infill submarkets on a case-by-case basis,” Petsas said.
EastGroup seeks to emphasize investment in industrial property in California, Arizona, Texas, Florida and North Carolina. The company buys existing properties and develops new assets. Its total portfolio amounts to more than 30 million square feet.