1550 0 VALENCIA AVE, FONTANA, CA 92335
Offering Memorandum
L.A. Lumber Treating, Ltd.8.58 acre rail-served industrial site in the Inland Empire | New 20-year NNN lease 100% leased to a leading producer of treated lumber products Water-based preservatives only, no oil-based preservatives have ever been used on the site
L.A. LUMBER TREATING, LTD.
L.A. Lumber Treating, Ltd.1550 0 VALENCIA AVE, FONTANA, CA 92335
Matt Berres Executive Managing Directort 949-608-2066 [email protected] CA RE Lic. #01977909
Samer Khalil Directort 949-608-2042 [email protected] CA RE Lic. #02002301
Karick Brown Associatet 949-608-2175 [email protected] CA RE Lic. #02071955
Net Lease Capital Markets
Mark Kegans, SIOR Executive Managing Directort 909-974-4070 [email protected] CA RE Lic. #00866145
Ron Washle, SIOR Executive Managing Directort 909-974-4071 [email protected] CA RE Lic. #00978222
Local Market Experts
2NEWMARK
19.8 Years WALT
Fee SimpleOWNERSHIP INTEREST
NNNLEASE STRUCTURE
The OfferingNewmark, as an exclusive advisor, is pleased to present the opportunity to acquire a single-tenant, absolute NNN industrial property located in Fontana, CA (Inland Empire). The property sits on an 8.58 acre site and is 100% leased to L.A. Lumber Treating, Ltd. on a new 20-year lease.
Best Offer ASKING PRICE
L.A. LUMBER TREATING, LTD.
3NEWMARK
Investment Highlights8.58-ACRE RAIL-SERVED INDUSTRIAL SITE IN THE INLAND EMPIRE | 100% LEASED TO L.A. LUMBER TREATING, LTD. (SUBSIDIARY OF DOMAN BUILDING MATERIALS – TSX: DBM; DBM.NT)The subject property sits on an 8.58-acre site zoned Regional Industrial and benefits from a BNSF rail spur providing direct access to the BNSF railroad network. Located in the heart of the Inland Empire, the property is 100% leased to L.A. Lumber Treating, Ltd. (“L.A. Lumber”), a subsidiary of Doman Building Materials (TSX:DBM; DBM.NT), one of North America’s largest producers of pressure treated lumber products with 32 operating plants, and also distributes and produces a wide range of building materials, lumber, and renovation products. In June 2021, L.A. Lumber acquired the business of the subject property’s prior owner/user (Fontana Wood Preserving, Inc. and Fontana Wholesale Lumber, Inc.) and the property added fire retardant treating an almost doubling of overall capacity in Doman’s operations in Southern California. Doman’s reported total revenue was $1.61 billion for fiscal year ending 12.31.2020, representing an increase of 20.96% compared to the prior year.
NEW 20-YEAR NNN LEASE | 19.8 YEARS OF FIRM TERM REMAININGL.A. Lumber signed a 20-year lease in June 2021 and currently has approximately 19.8 years remaining in the primary term, with two (2), five (5) year options to extend. The passive triple-net (NNN) lease is ideal for both local and out-of-area investors. Landlord responsibilities are limited to capital expenditures, which are amortized and reimbursed by tenant over the balance of the lease term.
FIXED RENTAL INCREASES | 100%+ RENT GROWTH OVER THE PRIMARY TERM & 10% AT EACH OPTIONThe lease features fixed rental increases throughout the base term and 10% increases at the start of each option period providing a hedge against inflation and significant income growth (see page 9 for rent schedule).
IRREPLACEABLE SOUTHERN CALIFORNIA LOCATION | SUPPLY CONSTRAINED MARKETPLACE | MAJOR DISTRIBUTION CORRIDOR | HIGH BARRIERS TO ENTRY & LIMITED COMPETITIONThe subject property is located at an irreplaceable location in Southern California’s Inland Empire, one of the most supply constrained markets nationwide with total inventory of approximately 648.6M SF and a 1.7% total vacancy rate. The subject property is one-of-two wood treatment facilities in the LA region. Strict regulatory requirements increase the intrinsic real estate value of the subject property. L.A. Lumber Treating, Ltd. is centrally located 5 miles east of Ontario International Airport, with easy trucking access via both Interstate 15 (157,900 VPD) and Interstate 10 (221,370 VPD) the two major thoroughfares connecting the Inland Empire with the larger LA basin region. The extremely difficult regulatory requirements for initiating a wood treatment facility in the LA region, create a high barrier to entry marketplace with few competitors. Specifically, the subject property retains a majority share of the Treatment Service Only (TSO) business in the LA basin.
L.A. LUMBER TREATING, LTD.
Price/Cap Rate
Price (PSF) Best Offer
Annual NOI $540,000
Executive Summary
Address15500 Valencia Ave, Fontana, CA 92335
Tenant / Lease EntityL.A. Lumber Treating, Ltd. / a subsidiary of Doman Building Materials Group Ltd. (TSX:DBM; DBM.NT)
Use Industrial
Rentable Building Area (SF) 16,500
Land Area 8.58 Acres / 373,975 SF
Expense Structure NNN
Rent IncreasesSee Rent Schedule for primary term increases. 10% at each option.
Lease Commencement June 22, 2021
Lease Expiration June 22, 2041
Lease Term Remaining 19.8 Years
Renewal Options 2 (5-Year)
Ownership Interest Fee Simple (Land & Building)
Investment Overview
4NEWMARK
SITE AERIAL WEST
RAILROADRAILROAD
VALENCIA AVENUE
VALENCIA AVENUE
ARROW ROUTE
ARROW ROUTE
FOOTHILL BOULEVARDFOOTHILL BOULEVARD
WH
ITTRA
M AVEN
UE
WH
ITTRA
M AVEN
UE
LIME AVENUE
LIME AVENUE
BEECH AVENUEBEECH AVENUE
SULTANA AVENUESULTANA AVENUE
1,399 VPD
1,399 VPD
1,194 VPD1,194 VPD
15,065 VPD15,065 VPD
33,107 VPD33,107 VPD
L.A. Lumber Treating,
Ltd.
Water Works Manufacturing
Inland Body & Paint Center
Fontana Pipe Processing
Mill Man Steel
Distribution
RAILROADRAILROAD
RAILROADRAILROAD
VALENCIA AVENUE
VALENCIA AVENUE
WHITTRAM AVENUE
WHITTRAM AVENUE
LIME AVENUELIME AVENUE
BEECH AVENUEBEECH AVENUESULTANA AVENUESULTANA AVENUE
1,399 VPD
1,399 VPD1,194 VPD1,194 VPD
SITE AERIAL SOUTHWEST
L.A. Lumber Treating,
Ltd.
Water Works Manufacturing
Inland Body & Paint Center
Fontana Pipe Processing
Mill Man Steel
RAILROADRAILROAD
RAILROAD
RAILROAD
VALE
NCIA AVENUE
VALE
NCIA AVENUE
LIME AVENUELIME AVENUE
SULTANA AVENUE
SULTANA AVENUE
1,399
VPD
1,399
VPD
1,194 VPD1,194 VPD
ARROW ROUTE
ARROW ROUTE
15,065 VPD15,065 VPD
SITE AERIAL EAST
L.A. Lumber Treating,
Ltd.
Water Works Manufacturing
Inland Body & Paint Center
Fontana Pipe Processing
Mill Man Steel
8NEWMARK
The Investment
THE INVESTMENT
L.A. LUMBER TREATING, LTD.
Lease Abstract & Property Details
Property Overview
Rentable Building Area (SF) 16,500 SF
Land Area 8.58 Acres / 373,975 SF
Year Built/Renovated1981 (Treatment/Heavy Industrial Building)2000 (Storage Building)2005 (Storage Building)
Parcel 0232-151-19-0000, 0232-151-19-1000
Zoning / Use IR (Regional Industrial) / Heavy Industrial
Lease Abstract
Address 15500 Valencia Avenue, Fontana, CA 92335
Tenant Trade NameL.A. Lumber Treating, Ltd. / a subsidiary of Doman Building Materials Group Ltd. (TSX:DBM; DBM.NT)
Credit Rating Not Rated
Lease Commencement June 22, 2021
Lease Expiration June 22, 2041
Lease Term Remaining 19.8 Years
Renewal Options 2 (5-Year)
Base Rent (PSF) $540,000.00
Rent Increases See Rent Schedule for primary term increases. 10% at each option.
Lease Structure NNN
Landlord Maintenance Responsibilities
Limited to capital expenditures, which are amortized and reimbursed by tenant over the balance of the lease term.
ROFR None
Rent Schedule
Annual RentPSF
(Land)Monthly Rent
PSF (Land)
% Increase
6/22/21 - 6/22/23 $540,000 $1.44 $45,000 $0.12 -
6/23/23 - 6/22/25 $600,000 $1.60 $50,000 $0.13 11.11%
6/23/25 - 6/22/29 $660,000 $1.76 $55,000 $0.15 10.00%
6/23/29 - 6/22/32 $720,000 $1.93 $60,000 $0.16 9.09%
6/23/32 - 6/22/35 $780,000 $2.09 $65,000 $0.17 8.33%
6/23/35 - 6/22/38 $840,000 $2.25 $70,000 $0.19 7.69%
6/23/38 - 6/22/41 $900,000 $2.41 $75,000 $0.20 7.14%
Option 1: 6/23/41 -6/22/46 $990,000 $2.65 $82,500 $0.22 10.00%
Option 2: 6/23/46 - 6/22/51 $1,089,000 $2.91 $90,750 $0.24 10.00%
“June 22, 2021, Doman Building Materials Group Ltd. completed the acquisition of Fontana Wholesale Lumber, Inc. and Fontana Wood Preserving, Inc., adding fire retardant treating along with an almost doubling of overall capacity in Doman’s operations in Southern California.”
9NEWMARK
10NEWMARK
PHOTOS
L.A. LUMBER TREATING, LTD.
11NEWMARK
Inland Empire Industrial Market Frenzied Leasing Activity Causes Rents to Soar
Market Analysis
– Vacancy is now on par with Los Angeles’ 1.5% average.
– Desirable buildings that come to market can attract up to 10 offers; bidding wars ensue.
– Many tenants are agreeing to landlord terms when their leases are up for renewal; no negotiations.
– Restoration Hardware, Geodis Logistics, Skechers, Amazon, Subaru of America and FedEx all took occupancy of spaces greater than 500,000 square feet.
– Occupiers have taken 87.8% of the 20.9 million square feet of new supply delivered over the last 12 months.
– Loaded inbound volume at the ports in the first five months of 2021 was up 47.1% from the same period in 2020.
– Domestic distributors are trying to replenish inventories amid global supply chain disruptions, which is leading to severe congestion at Los Angeles-Long Beach.
– A total of 13 container ships were anchored, awaiting entry into the twin ports on June 24.
– Some companies are relying on air freight (up to 10x more expensive than ocean transport) to get product into the U.S
Market Analysis
Market SummaryCurrent Quarter
Prior Quarter
Year Ago
12 Month Forecast
Total Inventory (SF) 648.6M 644.8M 626.2M
Total Vacancy Rate 1.7% 2.4% 3.8%
Quarterly Net Absorption (SF)
8.3M 8.0M 4.1M
Average Asking Rent/SF/Month
$0.77NNN
$0.73NNN
$0.68NNN
Deliveries (SF) 3.7M 3.1M 4.6M
Under Construction (SF) 22.6M 19.8M 18.7M
VACANCY AND ASKING RENT
$0.40
$0.50
$0.60
$0.70
$0.80
0%
1%
2%
3%
4%
5%
2Q16 2Q17 2Q18 2Q19 2Q20 2Q21
Average Asking Rent (per SF/NNN) Vacancy (%)
NET ABSORPTION, CONSTRUCTION DELIVERIES AND VACANCY
0%
1%
2%
3%
4%
5%
0
3
6
9
12
2Q16 2Q17 2Q18 2Q19 2Q20 2Q21
SF
(in
mill
ions
)
Net Absorption (SF) Deliveries (SF) Vacancy (%)
“Southern California’s Inland Empire remains one of the country’s hottest industrial markets through 2Q2021 with a 1.7% total vacancy rate and 8.3M SF in absorption.”
Source: Newmark 2Q21-Inland-Empire-Industrial-Market Report11NEWMARK
L.A. LUMBER TREATING, LTD.
12NEWMARK
RESEARCH Q2 2021
NN EE WW MM AA RR KK IN L A N D E M P IR E IN D U S T R IA L M A R K E T 2
RREESSEEAARRCCHH QQ22 22002211
LLeeaassee TTrraannssaaccttiioonnssTTeennaanntt BBuuiillddiinngg CCiittyy LLeeaassee TTyyppee SSqquuaarree FFeeeett
Mars Petcare Phantom West & Nevada Avenue Victorville Build-to-suit 819,964
Noble House Home Furnishings 3655 E Philadelphia Street Ontario Renewal 741,458
Amazon 1895 Marigold Avenue Redlands New 699,350
SSaallee TTrraannssaaccttiioonnssBBuuyyeerr BBuuiillddiinngg((ss)) CCiittyy SSaallee PPrriiccee ((PPSSFF)) SSqquuaarree FFeeeett
Costco 5600 E. Airport Drive Ontario $345,000,000 ($214/SF) 1,613,290
The Blackstone Group Inc. 3994 & 3996 S. Riverside Avenue Colton $231,200,000 ($166/SF) 1,396,495
Duke Realty Corporation 2151 S. Vintage Avenue Ontario $184,170,000 ($240/SF) 766,235
there are growing concerns of another outbreak, this time from the Delta variant, in Southern China.
Global supply chain disruptions, whether in the form of a pandemic, port strike, raw material shortages or the blockage of a major trade route (e.g. the Suez Canal in March 2021) have serious repercussions on the costs (far higher) and timeliness (far longer) of goods entering the U.S.
The JIT model strains distributors in such periods and accounts for why many are shifting to more of a just-in-case model. By having excess inventory on hand, distributors can help mitigate against future disruptions.
Growing domestic inventory capacities leads to more demand for warehouse space, which favors a big-box market like the Inland Empire. When paired with pre-pandemic conditions, such as rising e-commerce sales, balanced development activity, healthy consumer spending, proximity to major consumer populations, access to multi-modal transport and demand for
modern facilities, then it is apparent why today’s leasing activity is frenzied.
CCoonnttrraacctt RReennttss aarree SSkkyyrroocckkeettiinngg Warehouse contract rents for direct leases and renewals over 100,000 square feet in spaces with a 30-foot and greater ceiling height had a weighted average of $0.71/SF/month in the first half of 2021, up 29.2% from the same period in 2020.
As of late, however, pricing benchmarks are being set on a deal-to-deal basis. There is also the time gap between recently signed leases and those in active negotiations. In the western half of the market, for instance, some leases were being negotiated north of $1.00/SF/month in late June.
OOuuttllooookkLandlord-favorable conditions abound, and very aggressive rent growth will follow. This is based on contracting vacancy and escalating land costs, which, in addition to pricy raw materials, will drive up replacement costs for new construction.
LLooaaddeedd IInnbboouunndd CCaarrggoo
2,000
2,500
3,000
3,500
4,000
4,500
May-16 May-17 May-18 May-19 May-20 May-21
TEU
s(i
n th
ousa
nds)
Ports of Los Angeles and Long Beach
YYTTDD IImmppoorrtt VVoolluummeeQQuuaarrtteerrllyy AAvveerraaggeess
UU..SS.. TToottaall BBuussiinneessss:: IInnvveennttoorriieess ttoo SSaalleess RRaattiioo
Source: Port of Los Angeles, Port of Long Beach Source: US Census Bureau (not seasonally adjusted); based on the most current data available
1.30
1.35
1.40
1.45
1.50
1.55
1Q16 1Q17 1Q18 1Q19 1Q20 1Q21
NN EE WW MM AA RR KK IN L A N D E M P IR E IN D U S T R IA L M A R K E T 3
RREESSEEAARRCCHH QQ22 22002211
SSuubbmmaarrkkeett SSttaattiissttiiccssTToottaall IInnvveennttoorryy ((SSFF))
UUnnddeerr CCoonnssttrruuccttiioonn((SSFF))
TToottaallVVaaccaannccyyRRaattee
QQttrr NNeettAAbbssoorrppttiioonn((SSFF))
YYTTDD NNeettAAbbssoorrppttiioonn ((SSFF))
WWhh//DDiissttAAsskkiinngg RReenntt((PPrriiccee//SSFF))
GGeenneerraall IInnddAAsskkiinngg RReenntt((PPrriiccee//SSFF))
TToottaall AAsskkiinngg RReenntt((PPrriiccee//SSFF))
East I.E. 247,321,988 11,753,209 2.1% 5,393,492 7,989,714 $0.74 $0.75 $0.75
High Desert 14,249,066 843,544 3.8% -97,854 -97,854 - $0.51 $0.51
South I.E. 18,235,677 501,796 1.9% -24,813 -41,345 $0.70 $0.85 $0.73
West I.E. 368,780,489 9,530,203 1.3% 3,015,304 8,446,510 $0.89 $0.94 $0.91
Market 648,587,220 22,628,752 1.7% 8,286,129 16,297,025 $0.77 $0.77 $0.77
SSuubbmmaarrkkeett BBrreeaakkddoowwnnssCCiittiieess
East I.E. Banning, Beaumont, Bloomington, Calimesa, Colton, Glen Avon, Grand Terrace, Highland, Loma Linda, Mentone, Moreno Valley, Perris, Rialto, Redlands, Riverside, Rubidoux, San Bernardino, Yucaipa
High Desert Adelanto, Apple Valley, Barstow, Desert Knolls, Helendale, Hesperia, Lancaster, Lenwood, Lucerne Valley, Phelan, Silver Lakes, Victorville
South I.E. Hemet, Lake Elsinore, Menifee, Murrieta, San Jacinto, Sun City, Temecula, Wildomar
West I.E. Chino, Chino Hills, Corona, Eastvale, Fontana, Jurupa Valley, Mira Loma, Montclair, Norco, Ontario, Rancho Cucamonga, Upland
Net absorption is the change in physically occupied space. A hypothetical vacant and available space could lease this quarter with the tenant set to take occupancy six months later; positive absorption is not recorded until this physical move-in occurs. The space will remain vacant, but not available, until occupancy.
The total asking rent is the weighted average across warehouse, manufacturing, flex, incubator and general industrial properties.NN EE WW MM AA RR KK IN L A N D E M P IR E IN D U S T R IA L M A R K E T 3
RREESSEEAARRCCHH QQ22 22002211
SSuubbmmaarrkkeett SSttaattiissttiiccssTToottaall IInnvveennttoorryy ((SSFF))
UUnnddeerr CCoonnssttrruuccttiioonn((SSFF))
TToottaallVVaaccaannccyyRRaattee
QQttrr NNeettAAbbssoorrppttiioonn((SSFF))
YYTTDD NNeettAAbbssoorrppttiioonn ((SSFF))
WWhh//DDiissttAAsskkiinngg RReenntt((PPrriiccee//SSFF))
GGeenneerraall IInnddAAsskkiinngg RReenntt((PPrriiccee//SSFF))
TToottaall AAsskkiinngg RReenntt((PPrriiccee//SSFF))
East I.E. 247,321,988 11,753,209 2.1% 5,393,492 7,989,714 $0.74 $0.75 $0.75
High Desert 14,249,066 843,544 3.8% -97,854 -97,854 - $0.51 $0.51
South I.E. 18,235,677 501,796 1.9% -24,813 -41,345 $0.70 $0.85 $0.73
West I.E. 368,780,489 9,530,203 1.3% 3,015,304 8,446,510 $0.89 $0.94 $0.91
Market 648,587,220 22,628,752 1.7% 8,286,129 16,297,025 $0.77 $0.77 $0.77
SSuubbmmaarrkkeett BBrreeaakkddoowwnnssCCiittiieess
East I.E. Banning, Beaumont, Bloomington, Calimesa, Colton, Glen Avon, Grand Terrace, Highland, Loma Linda, Mentone, Moreno Valley, Perris, Rialto, Redlands, Riverside, Rubidoux, San Bernardino, Yucaipa
High Desert Adelanto, Apple Valley, Barstow, Desert Knolls, Helendale, Hesperia, Lancaster, Lenwood, Lucerne Valley, Phelan, Silver Lakes, Victorville
South I.E. Hemet, Lake Elsinore, Menifee, Murrieta, San Jacinto, Sun City, Temecula, Wildomar
West I.E. Chino, Chino Hills, Corona, Eastvale, Fontana, Jurupa Valley, Mira Loma, Montclair, Norco, Ontario, Rancho Cucamonga, Upland
Net absorption is the change in physically occupied space. A hypothetical vacant and available space could lease this quarter with the tenant set to take occupancy six months later; positive absorption is not recorded until this physical move-in occurs. The space will remain vacant, but not available, until occupancy.
The total asking rent is the weighted average across warehouse, manufacturing, flex, incubator and general industrial properties.
Source: Newmark 2Q21-Inland-Empire-Industrial-Market Report12NEWMARK
L.A. LUMBER TREATING, LTD.
13NEWMARK
RESEARCH Q2 2021
Source: Newmark 2Q21-Inland-Empire-Industrial-Market Report
L.A. Lumber Treating,
Ltd.
13NEWMARK
L.A. LUMBER TREATING, LTD.
14NEWMARK
Tenant Synopsis
L.A. Lumber Treating, LTD.
Trade Name L.A. Lumber Treating, Ltd. / a wholly owned subsidiary of Doman
Parent Company Doman Building Materials Group Ltd. (TSX:DBM; DBM.NT)
Number of Total Locations 32 Operating Plants
Geographic Dispersion US & Canada
Website https://canwel.com/about-us/
Revenue (TTM as of 9.23.2021) (DBM.TO) $2.15 Billion
EBITDA (TTM as of 9.23.2021) DBM.TO) $242.1 Million
Total Assets (As of 12.31.2020) DBM.TO) $867.22 Million
Market Cap (As of 9.23.2021) DBM.TO) $570 Million
Tenant / Guarantor Synopsis
On June 22, 2021, Doman Building Materials Group Ltd. (TSX:DBM; DBM.NT) announced that its wholly owned subsidiary L.A. Lumber Treating, Ltd. (“L.A. Lumber or LALT”) acquired the lumber pressure treating plant, related equipment and business formerly owned by Fontana Wood Preserving, Inc. and Fontana Wholesale Lumber, Inc. and joined its California Cascade family of businesses.
Due to strict regulatory requirements, there are only two wood treatment plants in the LA region, making LALT’s operations a valuable asset in a busy, dynamic and essential industry space.
L.A. Lumber Treating, Ltd. will continue the plant’s Treating Service Only (TSO) focused operations, where customers bring their lumber to the plant, it is treated, and then transported back to the location of the customer’s choosing at customer’s expense.
LALT will continue using four types of water-based wood preservatives at the site, and no oil-based preservatives have never been used on the site.
– CA-C (Copper Azole) - CA-C, is a copper-based preservative designed to treat wood intended for residential building projects. CA-C treated wood is clean, paintable, and well-protected from insects and rot.
– Borates/DOT (Disodium Octoborate Tetrahydrate) - DOT protects wood against Formosa, other termite species and fungal decay, and is typically utilized in dry interior applications
– D-Blaze® - D-Blaze® is an interior variety fire retardant wood treatment that is impregnated into framing lumber and plywood products by a pressure process to reduce combustibility and smoke development. LALT is the sole distributor of D-Blaze® in the Southern California region, making this application an extremely valuable asset to any purchaser of the business.
– Heat Treating - In addition to wood preservation, LALT provides heat treating services to the industrial market.
14NEWMARK
Karick Brown Associatet 949-608-2175 [email protected] CA RE Lic. #02071955
The information contained herein has been obtained from sources deemed reliable but has not been verified and no guarantee, warranty or representation, either express or implied, is made with respect to such information. Terms of sale or lease and availability are subject to change or withdrawal without notice.
18401 Von Karman Ave, Suite 150 Irvine, CA 92612
Local Market Experts:
Ron Washle, SIOR Executive Managing Directort 909-974-4071 [email protected] CA RE Lic. #0097822
Mark Kegans, SIOR Executive Managing Directort 909-605-1100 [email protected] CA RE Lic. #00866145
Net Lease Capital Markets:
L.A. Lumber Treating, Ltd.
nmrk.com
Samer Khalil Directort 949-608-2042 [email protected] CA RE Lic. #02002301
Matt Berres Executive Managing Directort 949-608-2066 [email protected] CA RE Lic. #01977909
