By Jon Peterson
Plymouth Meeting, Pa., -based Urdang Capital Management Inc. expected a long-term hold when it bought Newark’s 238,000-square-foot 39889 Eureka Drive industrial building last year.
“Our original idea when we took the property over last year was to hold onto the asset for a three- to five-year period,” said Cyndi Thomas, an Urdang vice president in the company’s Newport Beach regional office. Initial discussions with MiTac included the electronics manufacturing company leasing the entire building. “This all changed once we got comfortable with the idea and the price of selling the property to MiTac,” Thomas said.
The U.S. division of Taiwanese company MiTac International Corp. currently occupies space in Fremont, which the company Web site identifies as part of its “factory and assembly configuration” that includes two locations in China.
David Lin, MiTac director of business operations, said the move allows the company to consolidate its operations into one location and does not involve any workforce reduction. “We are now in four different buildings in Fremont. The purchase of the property in Newark will allow us to have everyone in one location,” he said. The company has from 300 employees to 400 employees working in Fremont, depending on the number of temporary workers.
The company first began to look for a new location last year. “We wanted to make it close by for both our employees and the companies that we do business with,” said Lin. The company’s main line of business is building and testing servers for companies in Silicon Valley. Most of this is with hard-drive servers.
MiTac does joint development management and manufacturing, original design manufacturing, original equipment manufacturing and original product manufacturing. Its brands include Mio, Magellan, Navman and TYAN.
The sales price is probably less than what MiTac would need to spend to duplicate the property today, Thomas said: “My guess is that replacement cost on this kind of building in that market would be around $100 per square foot, and they paid $93.”
The property is mostly warehousing—191,000 square feet with ceilings 30 feet to 32 feet in height. The office build-out amounts to 18 percent of the property, with a 5,000-square-foot test and repair area. It also has a commercial-grade kitchen.
Urdang and Irvine-based CapRock Partners formed a joint venture to acquire the Newark property with Urdang as the majority owner. The two firms bought a discounted note directly from an undisclosed bank in June 2011 for $9.8 million, or $41 a foot. The original borrower was in bankruptcy. They took title to the property a year ago through a foreclosure.
Urdang would not disclose who the lender was due to a non-disclosure agreement with the institution. When the real estate manager took over the property, it was empty. It wanted to make it a single-tenant asset. The 2008 vintage property was in good shape and needed just a little bit of deferred maintenance.
The sale of the property was not a cap rate deal as there was no income coming out of the asset when the note was acquired. CB Richard Ellis was involved in the transaction on the sale and buy side of the deal. Greg DeLong, a first vice president in the Palo Alto office, and Chip Sutherland, a senior vice president in the San Jose office, represented the sellers. The buyer used the services of Joe Kelly, a first vice president in Palo Alto, and Rob Shannon, a senior vice president in San Jose.
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Photo courtesy of newark.org