“It’s a pretty exciting project,” said Tom O’Keefe, chairman and CEO of O’Keefe Development, describing his nearly completed 1.2 million square foot industrial project in Centralia, Wash. that has been leased to United Natural Foods for a 20-year period. “It’s something, believe it or not, I started working on in August of 2016.”
In just about twenty-four months, the development went from dirt to lease, which speaks not only of this city’s ability to get stuff done, but also of the industry’s seemingly insatiable demand for industrial space, one of the darling sectors of the commercial real estate industry.
Back in 2016, O’Keefe and his Director of Operations, Harpur Davidson, were actively tracking industrial needs of several large grocery suppliers. At that time, Supervalu and Unified Grocers were separate organizations and both independently looking to expand their footprint in the Centralia region.
Then in early 2017, Minneapolis-based Supervalu decided to purchase Commerce, Calif.-based Unified Grocers for $375 million, creating a combined operation of $16 billion in sales and 3,000 retail locations. After the acquisition, the two firms joined their efforts in seeking for additional space, and the two were introduced to O’Keefe by Scott Carter and Les Boudwin, managing directors of JLL in Bellevue, who became the brokers of record for the new organization.
The twists to the story did not end there. Just about a year later, in July of 2018, Supervalu was purchased by a smaller competitor, United Natural Foods, for $2.9 billion. United Natural Foods was at that time a business that generated $9.3 billion in sales, a little over half of what the combined Supervalu accomplished in fiscal 2018. United Natural Foods’ primary customer at the time was Amazon-owned Whole Foods.
The goal of finding a suitable space in the region never dissipated, and the development team was looking to identify a centrally-located site for a build-to-suit development. O’Keefe’s company was one of several options they considered. “The strategy for the [joint organization] was to have a centrally located distribution facility for their northwest operations,” said O’Keefe.
The combined company was also considering using the facility to reach markets outside of the Pacific Northwest region, including Northern California and beyond. They also wanted something centrally located between Seattle and Portland in order to have access to both markets to the north and south. According to O’Keefe, the company looked at a number of sites, including ones at the Port of Tacoma, DuPont and Lacey, however, they ultimately picked Centralia.
The deal in Centralia was compelling for a number of reasons, according to O’Keefe. It included a larger facility spanning across 77 acres and totaling 1.2 million square feet. The property could offer abundant area for trucking, a massive trailer park and the ability for truck maneuverability. In addition, the facility would be able to offer dry storage and cooler/freezer storage for everything that goes into a grocery store.
The 77 acres were acquired from the Benaroya Company. O’Keefe took some conceptual drawings of the facility and turned them into working drawings. In about one year, the entire project was finalized. The drawings were not completed when the lease was signed in 2018, and O’Keefe turned the first shovel in June of 2018. On July 1st 2019, the company will be giving United Natural Foods the keys to the building.
The structure is somewhat unique, according to O’Keefe. It is a couple of thousand feet long, and 620 feet deep. The project has 40 foot clearings, and the building meets FM Global insurance standards, which evaluate risk to property based on construction material. “We don’t have a piece of wood in the roof,” said O’Keefe. “It is all steel, that is for long term viability, since it is a 20-year lease.”
Benaroya Capital provided the loan for construction, which was in excess of $100 million. The continued partnership between the two companies was part of the acquisition deal when O’Keefe purchased the 77 acres from Benaroya.
And the developer has only praise for the city of Centralia and the Port of Centralia, where the project is located. “Both the Port and City of Centralia have been fabulous,” added O’Keefe. Typical deals like these can take a year just to complete drawings and attain permits. The fact that this entire building was completed in that same time frame speaks to the city’s ambitions in economic and job growth. The City of Centralia is very pro growth, O’Keefe stated, and they were excited to see 350 new permanent jobs created by this development with more to follow.
O’Keefe has been in this game for several decades. He founded his company in 1986, and since its inception, O’Keefe Development has developed or acquired approximately five and a half million square feet of commercial real estate projects with an asset value of approximately $1 billion.
Lance Mueller & Associates, who has worked with O’Keefe on a few other projects in the past, designed the Centralia building.
Poe Construction of Auburn was the general contractor on the development, and its President, Wayne Williams, grew up just blocks from the site. Dan Balmelli, executive vice president at Barghausen Consulting Engineers, which led the engineering work on the project, grew up in Chehalis, just down the road. “The fact that I was able to come here with two guys that I’ve known for 30 years and who have done projects for me, this was their hometown, it was kind of fun,” said O’Keefe.
Other project members included Engineers Northwest of Seattle, Terra Associates of Kirkland, Bethlehem Construction of Cashmere and Leslie Engineering of Yakima.