ACORE lends $71.25M for North Palisade's Santee industrial build

ACORE Capital has committed $71.25 million in acquisition and construction financing to North Palisade Partners for the Palisade Santee Commerce Center, a two-building industrial development in Santee, Calif., 20 miles northeast of downtown San Diego, Commercial Observer reported. The financing covers the sponsor's purchase of a 13.4-acre infill site at 10990 North Woodside Avenue for $22.7 million from an unidentified seller, plus ground-up construction of 290,618 square feet across two buildings with 296 parking spaces, slated for completion in late 2027. The lender did not break out the split between land and vertical construction, though against a $22.7 million purchase price the larger share is presumably the build.

Cushman & Wakefield negotiated the debt, with Rob Rubano, Brian Share and Joe Lieske leading the team. Dimitar Goulev, a managing director of originations at ACORE, called the site a rare chance to build high-quality industrial space in San Diego County, which has added little new product in recent years, and pointed to its proximity to the region's major transportation corridors. Eastern San Diego County's industrial vacancy rate sits at 1.5 percent, according to Goulev, and the tenant demand he is seeing runs to 50,000-square-foot spaces from warehousing, distribution and light manufacturing users.

Land at $22.7 million against 290,618 planned square feet works out to about $78 a foot before sitework, steel or tenant improvements, and it clears only if rents hold at scarcity levels into a 2027 delivery. Scarcity is the trade. Construction starts have thinned enough that managers including Hines have been underwriting the freeze itself, on the logic that a construction freeze leaves the next delivered building without competition. Industrial pricing has split along the same line: infill product commands the premium while older assets trade flat. Link Logistics' Fort Lauderdale campus went for $57 million this month, against $17.5 million in 2013, which is a different trade from what North Palisade is financing.

ACORE's $18.3 billion in regulatory assets under management across 29 accounts gives it a book large enough to hold construction paper through a 2027 delivery, and the sponsor's timeline runs longer still: chief financial officer Joe Maeler put the project at more than four years in the making. Four years of carry on a fixed land basis is the bet that a 1.5 percent vacancy rate has to reward. Completion is set for late 2027, when 290,618 square feet of new space tests how durable that number is.