CB Richard Ellis Industrial Services collaborates with Global Corporate Services on an 872,000-sq.-ft. build-to-suit distribution facility for PetSmart outside of Reno, Nevada. 

Challenge

In October 2006, CBRE’s Global Corporate Services team in Phoenix reached out to the Industrial Tenant Advisory Services team in Stockton, CA, to facilitate an 850,000-sq.-ft. to 1.2 million-sq.-ft. build-to-suit distribution facility on behalf of PetSmart.

PetSmart sought a location between Northern California and Reno, Nevada, to serve the company’s existing retail stores and accommodate store growth in the western United States. The facility needed to be operational by April 2008. Additionally, PetSmart had approximately three years remaining on a 200,000-sq.-ft. facility in Reno, representing a significant contingent rental obligation.

Solution

After extensive labor, tax, demographic, incentive and real estate cost analysis for sites along a 300-mile corridor of Northern California and Western Nevada, the team decided to pursue a greenfield site east of Reno.

The team assisted PetSmart in analyzing multiple transaction scenarios, including lease vs. own, sale/leaseback, tenant equity and other arbitrage scenarios, before deciding that a traditional lease was the best option. The team then advised PetSmart in identifying viable site options, eventually securing a 58-acre site at the Tahoe Reno Industrial Center. Build-to-suit proposals were submitted to seven national developers. After two rounds of proposal negotiations, interviews with candidate developers and extensive analysis of design criteria and value engineering, Seefried Properties won the assignment in late December 2006. 

Benefit

CBRE’s Industrial Tenant Advisory Services and Global Corporate Services teams collaborated to provide transaction management and project management services, advising PetSmart and Seefried in their choice of general contactor, architect, engineering firms and other key consultants. Plans were submitted for approval and a grading permit was issued on March 19, 2007. Construction began immediately.

PetSmart ultimately signed a 15-year lease with Seefried. The team successfully negotiated an aggressive rental constant, substantial tenant improvements, a termination of the existing lease and provisions to ensure that the facility is completed on time. The team’s breadth of experience enabled them to navigate an extensive project evaluation and complex series of negotiations in 149 days, from initial contact to groundbreaking.