A publicly traded real estate trust has acquired nearly four percent of the 36 million square feet of industrial property on the San Francisco peninsula from a family owned investor in Oakland.
Ridgeland, Mississippi-based EastGroup Properties bought Tulloch Corp. in a stock deal, acquiring14 properties that combine for 1.7 million square feet, along with parcels of land totaling 10.5 acres. About 1.4 million square feet were in the San Francisco market, with another 300,000 or square feet in the Sacramento area.
EastGroup exchanged 1.87 million newly issued shares of its common stock at $190 per share and assumed $60 million in debt, putting the value of the deal at around $415 million. The properties are 100 percent leased to 37 tenants with an average remaining lease term of less than three years.
EastGroup now owns approximately 7.6 million square feet of commercial space in California–holdings that represent 21 percent of its total annualized base rental revenue. The Tulloch acquisition adds to a roster of Bay Area holdings that includes the Preston Distribution Center in Livermore; the Transit Disruption Center and Whipple Business Center in Union City; and the Wiegman and Huntwood Distribution Centers in Hayward.
The two land parcels it got from Tulloch will allow for the future development of approximately 215,000 square feet of new space.
“The Tulloch family, over three generations, built a very strong portfolio in terms of location, building quality and tenant quality,” EastGroup CEO Marshall Loeb said in a statement. “Within our own portfolio, San Francisco has historically been one of our strongest markets and also one where we’ve been under allocated capital-wise.”
Tulloch Corp. was owned by Brian Tulloch, who said he was an investor in EastGroup’s stock prior to the deal.
“I’ve been a shareholder for a number of years so I knew the company prior to launching the sales process,” Tulloch said. “Early on I was hoping there would be a way to reach this joint outcome.”
The Bay Area’s industrial market has been strong, reflecting a national trend that’s been ongoing throughout the pandemic, and the growth of e-commerce spurred demand for warehouses and other logistics space. Industrial space on the San Francisco peninsula finished last year with a vacancy rate of 3.1 percent and an average monthly lease rate of $1.70 per square foot.
Recent economic headwinds and a step away from acquisitions by Amazon indicate a shift in market conditions, but EastGroup CEO Loeb said he sees positive trends in continuing the Bay Area market, where the company continues shopping for deals..
“We’re very bullish about the future for our San Francisco portfolio,” he said. “Given recent headlines and resulting levels of concern, we are pleased to continue seeing strong levels of tenant demand across our portfolio as evidenced by our month end results.”
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