$30 million deal for Santa Rosa industrial buildings

<p>SANTA ROSA – In one of the largest commercial property transactions of the year, a Napa-based investment group acquired 269,000 square feet of light-industrial, warehouse and manufacturing space in north Santa Rosa for $30.5 million.</p><p>Sonoma Airport Properties LLC purchased three fully leased buildings from investor groups led by Carl Panattoni, a Sacramento-based developer who built the six-building development, called Airport Corporate Center, as well as hundreds of thousands of square feet of warehouse and office space in south Napa.</p><p>In fact, the off-market deal was cut because of a relationship the majority members in Sonoma Airport Properties, Ron and Betty Profili, had with Mr. Panattoni. The Profilis and Mike Sherman of Los Angeles, both acting as Profili-Sherman Properties, purchased an eight-building office, industrial and flex portfolio called Napa Airport Centre, totaling 255,000 square feet, from Mr. Panattoni, the builder.</p><p>The Profilis now have a commercial-property portfolio approaching 700,000 square feet.</p><p>“Buying quality property at a realistic price is very difficult,” Mr. Profili said. “Disposing of property in today’s world is extremely difficult.”</p><p>The asking price for the three buildings in Airport Corporate Center was $33 million, or about $122 a square foot. The sale was quick and came amid the worst national financing crisis in several decades. The parties opened the sale contract within a month of the first talks and closed the deal in October.</p><p> One of the consequences of the global credit crisis has been a lack of liquidity for deals of this size and greater requirements on borrowers, particularly having to put more money into deals. With mortgage interest rates around 6 percent, such as Sonoma Airport Properties’ 6.3 percent rate, investors are requiring higher rates of return, often measured by what is called a first-year capitalization rate evaluating property income against the purchase price. Mr. Profili said he’s satisfied with the spread between the 6.3 percent rate on the financing and the 7.5 percent combined cap rate on the acquisition.</p><p> “We’re proud that we closed a deal at all,” Mr. Profili said.</p><p>Minnesota-based commercial real estate investment bank NorthMarq arranged for Sonoma Airport Properties’ request for financing of $19 million of the purchase price, amounting to a loan-to-value proportion of 63 percent. A 10-year loan term with a 30-year amortization was obtained through 40/86 Mortgage, an Indiana-based subsidiary of insurer Conseco.</p><p>Sonoma Airport Properties’ buildings in Airport Corporate Center, located between Aviation and Airport boulevards on the east side of Brickway Boulevard, are occupied by four companies.</p><p>TriVascular2, the second iteration of a medical-device maker, has the largest property, a 110,250-square-foot manufacturing and warehouse building at 3910 Brickway, leased for another four years.</p><p>Filtration Group Inc., the largest maker of air filters in North America, and wine barrel builder Tonnellerie Radoux USA, part of the large Radoux group in Europe, occupy a 99,300-square-foot building at 480 and 498 Aviation Blvd. Their leases run through the next five to six years.</p><p>However, Avery Weigh-Tronix’s lease on the 60,500-square-foot building at 3990 Brickway is set to expire in November 2009, and the company doesn’t plan to renew, according to Mr. Profili. Avery Weigh-Tronix occupies only 30 percent of the space now.</p><p>A spokeswoman for Avery Weigh-Tronix confirmed its lease will expire late next year and that the company is “evaluating our options.”</p><p>Santa Rosa-based National Control, maker of precision components for measuring scales, merged with Minnesota-based Weigh-Tronix in 1986 and relocated to Airport Corporate Center shortly after Panattoni Development Co. finished the building in 1999. Avery Weigh-Tronix is now based in England, and on Sept. 26 of this year Chicago-based Illinois Tool Works acquired the company.</p><p>Marketing of 3910 Brickway through Cushman & Wakefield, which brokered the acquisition of the three buildings, is set to start early next year. The space now has 18,000 square feet of offices. The building can be divided into warehouse or production spaces as small as 20,000 square feet.</p><p>Early interest in 3910 Brickway has come from Francis Ford Coppola Presents, which is headquartered in Napa Airport Centre. Mr. Coppola’s company is in the midst of a major remodeling project at </p><p>its Geyserville winery, Rosso & Bianco, to transform it into a destination wine resort.</p><p>The Coppola Companies also are planning to set up a Cafe Coppola restaurant in Napa Airport Centre early next year, according to Mr. Profili. The owners of the other three Airport Corporate Center buildings are ThermalSun, which occupies its facility, and The Blackstone Group, which has leased two office buildings to Medtronic CardioVascular. </p><p>For more information, call Sonoma Airport Properties at 707-254-1600.</p>