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Record Year of Acquisitions Puts a Lot on Firm’s Plate

Westcore Properties founder and Chairman Marc Brutten says the San Diego-based investment firm will likely take a breather of sorts in the early part of 2013, after ending 2012 with a $700 million flurry of property acquisitions.

But it remains focused on growing its presence in strategic markets such as Northern California in coming months, and down the road in its hometown market.

“In the first two quarters of 2013, we’re probably going to be looking at transitioning overall operations and assimilating these new acquisitions into our portfolio,” Brutten said.

The privately held Westcore, started in 2000, posted a company record $885 million in acquisitions in 2012, nearly quintupling its 2011 deal volume and doubling its industrial and office footprint to 24 million square feet. It ended the year with one $600 million industrial portfolio purchase of 110 buildings, spanning 11 million square feet in the Sacramento region and the Midwest.

Westcore purchased the properties in a joint venture with a fund managed by New York-based DRA Advisors LLC. It was the year’s largest industrial real estate transaction in California and the second-largest in the U.S., according to brokerage firm Jones Lang LaSalle, which represented the buyers and seller.

That deal came on the heels of Westcore’s $110 million purchase of a 24-story Oakland office tower owned since 1988 by The Clorox Co., which will continue to house the cleaning products maker’s corporate headquarters.

Northern California Market

Westcore officials said Northern California will remain a key market for future acquisitions, as that region generally is seeing faster growth in jobs — along with rising office and industrial space expansion — than the rest of California and most of the United States.

Westcore President and CEO Don Ankeny said the size of the institutional-grade acquisitions underscores the company’s aim to become a “regional powerhouse” known for producing solid investment returns.

The $600 million industrial deal was an off-market transaction, with Westcore and its investment partners purchasing most of the portfolio of Joe Benvenuti Co., a Sacramento development firm named for its founder, who died earlier in 2012.

Brutten said that deal gave Westcore a sought-after boost in the Central Valley and Sacramento markets, where it now has increased access to industries tied to California’s still vibrant agriculture industry, including food processing and wine production. The portfolio also includes regional facilities of companies involved in industries such as auto parts and building supplies.

Renovating Properties

He said Westcore plans $7 million to $10 million in renovations of the Sacramento properties, some of which were built in the 1980s, aimed at making them more competitive in the market.

Westcore already has a sizable presence in California markets aided by continued high-tech growth, including Silicon Valley and the San Francisco Bay Area. It is tracking indicators of pent-up demand for industrial space elsewhere in the U.S., and will be scouting for buying opportunities in markets such as Denver and Phoenix, and eventually San Diego County, if the economy continues to improve amid scarce new construction.

“In the next few years, we’re also going to be doing some shopping in our own backyard,” Brutten said.

Westcore has acquisition deals in the works through its European operations in the U.K. and Switzerland. It also continues to reposition its portfolio by selling off properties that are not central to its long-term strategy geared to core markets, including $246 million worth of properties in the past year.

According to the San Diego office of Voit Real Estate Services, the local industrial property market continued on a path to recovery through much of the past year. The San Diego County industrial vacancy rate at the end of the third quarter was 7.49 percent, down from 7.95 percent a year ago.

Net absorption in the industrial market was positive for the 10th consecutive quarter. Voit researchers said the firm is keeping a close eye on demand, which will be influenced by employment growth and overall economic stability in coming quarters.


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