I just closed a sale transaction for a 16,600 square foot food production building in the City of Paramount located next to the 710 Freeway and Alondra Blvd in Los Angeles County, California. The agreed upon price was $6,850,000. I previously had this in escrow with a high-net-worth buyer who was also a world-famous restaurant operator. However he decided at the last minute to outsource the production of his frozen food line and thus cancelled the contract while forfeiting his deposit. I immediately called another food company in my extensive industrial company contact database and they expressed interest in the facility.
Soon enough my second buyer was under contract and in escrow to purchase this facility while conducting their due diligence and obtaining SBA financing. Several weeks ago we closed the transaction.
The facility was formerly occupied by a food production company that made ready to cook bowls of frozen meals. The new company will re-certify the facility with the USDA in order to use it for meat processing of beef and poultry. Many years ago the facility was used to manufacture frozen Chinese dumplings.
See below floor plan to understand the extensive buildout of specialized food rooms like freeers, coolers, and processing room with floor drains.
Additionally the building was located in a secure business park, had dock high loading, and dedicated parking spaces. The location is between Downtown Los Angeles, Vernon, and Commerce to the north and the port of LA to the south.
An approximately 20,000 square foot concrete building with 5,200 square feet of freezer & cooler boxes is expected to come available as a listing for lease in several months. It is an industrial warehouse with cold storage and dry storage that can accommodate 10 dock high refrigerated truck trailers – this is an unusually high number of loading positions for a building of this size.
There is plenty of yard and parking space given the large 43,000 square foot land parcel. Offices with restrooms included. Located the City of Commerce near the 5 Freeway about 10 minutes from Downtown Los Angeles (DTLA) and the City of Vernon.
Ideal for refrigerated food storage and distribution. Perishable foods such as prepared meals, poultry, seafood, beef, frozen foods, produce (fruit and vegetables).
Register preliminary interest by using the contact page.
Once you’ve opened escrow on a commercial real estate property, you will receive a preliminary report that describes the terms under which a title insurance policy will be issued for a specific parcel of land. It’s important to review this report so you understand any exceptions or exclusions from the title policy prior to completing your purchase.
Some Exceptions to the title policy coverage are shown above. Some common items are easements for utilities, tax liens, and street dedications.
WHAT IS A PRELIMINARY REPORT?
A preliminary report shows the ownership of a specific parcel of land, together with the liens and encumbrances tied to the property that will not be covered under a subsequent title insurance policy.
WHAT ROLE DOES A PRELIMINARY REPORT PLAY IN THE REAL ESTATE PROCESS?
While every property will have some exceptions, certain exceptions must be removed before a title policy can be issued. The preliminary report provides an opportunity for the parties to the real estate transaction and their agents to review and discuss items referenced in the report that are objectionable to the buyer prior to purchase.
WHEN AND HOW IS THE PRELIMINARY REPORT PRODUCED?
Shortly after escrow opens, the title company will begin assembling and reviewing certain recorded matters related to the property and the parties to the transaction. This may include things like a deed of trust recorded against the property or a lien recorded against the buyer or seller for an unpaid court award or unpaid taxes. These recorded matters are then listed numerically as “exceptions” in the preliminary report.
WHAT SHOULD I LOOK FOR WHEN READING MY PRELIMINARY REPORT?
You will be primarily interested in the extent of your ownership rights, so first review the ownership interest in the property you will be buying. The name of the owner of record shown in the report should match the name of the seller on your transaction. If the names don’t match, contact your escrow or title officer. You will also see the statement of vesting, which shows the form of the owner’s interest in the real property. “Fee” or “fee simple” is the highest type of ownership interest an owner can have. In some transactions, the interest might be a lease hold estate.
Next, you’ll see a reference to the legal description of the property, which is typically included in a separate schedule. There may also be a plat map or assessor’s map illustrating the location of the property. These maps are generated by the Los Angeles County Assessor for all property types including industrial real estate warehouses.
Finally, the report will reflect the exceptions, or those matters that will not be covered by the title insurance policy. Any transfer or encumbrance of this property will be subject to these exceptions unless steps are taken to eliminate them. Common exceptions include:
– Claims by creditors who have liens or liens for payment of taxes or assessments.
– Rules and regulations known as covenants, conditions and restrictions (CC&Rs) that must be followed by every homeowner in a covered community.
– Easements that give another party a right or interest in a property, such as providing a utility company access to install and maintain equipment or allowing a neighbor to cross over the property to gain access to their property.
– A deed of trust for any existing loan against the property.
Every title insurance policy will also contain an exhibit that lists exclusions from coverage. While the exceptions above are generally related to the subject property, exclusions are preprinted limitations on coverage that are included in all policies of the same type. It’s important to review this section, as it sets forth matters that will not be covered by your title insurance policy but that you may wish to investigate, such as governmental laws or regulations governing building and zoning.
If you have questions about the preliminary report, contact your title representative or escrow officer.
IS A PRELIMINARY REPORT THE SAME THING AS TITLE INSURANCE?
No. A preliminary report is simply a statement of terms and conditions of the offer to issue a title insurance policy; it is not a representation as to the condition of title. No contract or liability exists until the title insurance policy is issued.
As with any insurance market, the commercial property insurance market is constantly evolving, with new trends and challenges emerging that can impact both insurers and policyholders alike. Across the country, there have been several regulatory changes in recent years that have added costs and increased compliance requirements for insurers in this space. Specifically in California, there has been an increase in non-renewal notices as many insurance companies withdraw from the marketplace, most notably in Los Angeles County but also throughout the entire state.
Premium Change for Commercial Property, Q1 2017 – Q4 2023 from The Council of Insurance Agents & Brokers.
California has become one of the most difficult places to write insurance, so many carriers are exiting the market, reducing capacity, or only looking to insure best-in-class buildings.
Risk. Concern has grown over the incidence of natural disasters including wildfires, flooding, landslides, and earthquakes. This has caused premiums to further increase and caused reinsurance costs to be passed down to policy holders.
Insurers also consider a property’s likelihood for litigation and heightened number of claims. Multi-family is considered high risk because the human factor by nature yields an increased frequency of claims. The same can be said of retail shopping centers where there is increased foot traffic. In essence, the more people, the more claims. Industrial buildings and office properties, on the other hand, are considered moderate to lower risk, unless they have a very high vacancy rate which can make them susceptible to theft.
Building Age: In Los Angeles where the building stock is aging, the preferred market prioritizes either structures built within the last 30 years or those with records reflecting regular maintenance and upgrades. Insurance companies don’t inspect properties every year, which can have unfavorable outcomes for buildings that go several years without review. For example, many carriers are shying away from Los Angeles’ Downtown and Garment District because of the high incidence of claims coming from older warehouse and manufacturing buildings that haven’t been kept up. A lot of these older buildings are being placed on the Excess and Surplus Market (E&S) when the risk is too high to insure, which results in higher rates, and in some cases, limited coverage.
Here are some strategies:
Maintain accurate records. Well-kept documentation is the best tool an owner can have to prove the maintenance and renovation of their property. Remember: to secure a carrier in the preferred insurance market, the building does not have to be new, but the systems must be up to date. A 100-year-old building can get placement if inspections and records reflect optimal maintenance.
Check your online presence. These days, Google is the number one underwriting tool for insurance companies other than classic in-person visitation. If you haven’t already, Google your building to see what an agent will see online, then take action to improve your property’s virtual presence. This might mean removing encampments, replacing a roof, and cleaning away graffiti.
Practice preventative maintenance. If you don’t have a regular and consistent maintenance plan in place, it could lead to higher rates. Keep in mind that many industrial buildings were constructed 40 years ago or more, which puts them at the tipping point when it comes to insurance. Carriers are looking very stringently at buildings that have not been well maintained, but making regular improvements can improve your odds of good coverage.
Commercial Property Insurance
Commercial property insurance covers the physical building of your business and all of its business assets including inventory, products, equipment, furniture, personal property). This commercial property insurance coverage provides protection for types of damage from fire, theft, natural disasters, and vandalism. It is necessary if you own or lease your property.
You can insure your property on a replacement cost or actual cash value basis. Replacement cost reimburses you the actual amount to replace the lost or damaged item. Actual cash value is the replacement cost minus depreciation—which may not be enough to replace the damaged property.
Commercial crime insurance and equipment breakdown coverage are insurance policies that can be grouped under commercial property coverage.
Casualty Insurance
Casualty insurance is a group of liability policies to protect your business from any liability claim you may face. It usually includes these types of commercial insurance coverage:
General liability insurance: General liability coverage protects your business from liability if a third party suffers bodily injury or any other accidents on your property. Damage to their property and advertising injury are also covered under this insurance policy.
Workers’ compensation insurance: Workers’ compensation insurance helps protect your employees from on-the-job injuries. If an employee is accidentally injured at work, it will cover their medical expenses and a portion of their lost wages.
Errors and omissions insurance: If you make a professional error in the course of your work, it can cause serious issues. A client may sue you for damages, which is where a professional liability policy can help protect you and your business.
Cyber liability insurance: Cyber liability protects your customer’s data. If it’s compromised, this insurance covers notifying your customers, credit monitoring, and identity theft protection.
Employment practices liability insurance (EPLI): EPLI protects a business if an owner or manager is accused by employees of sexual harassment, discrimination, wrongful termination, etc. It can help cover the cost of a legal defense and possible settlements.
Directors and officers liability insurance: D&O Insurance protects directors and officers and their personal assets from losses if they’re sued for actual OR alleged wrongful acts while they manage a company or organization. It covers legal fees and other costs associated with claims.
Commercial umbrella insurance: An umbrella policy helps you cover claims if they exceed the limits of an underlying policy. It can be more cost-effective to purchase this insurance instead of upping the limits of other policies.
Commercial auto insurance: Commercial auto protects your business and employees if accidents occur that damages another vehicle or property.
Commercial property and casualty insurance are often sold together as a package deal, similar to a business owners policy. We recommend speaking with an agent to determine what types of casualty coverage you need to include in your insurance package based on your business type.
Long hood for cooking with trench drain belowRefrigerated coolerFreezer for storage of frozen foodsRacked dry storage area that is 23 foot high Wash room, scullery with dual sinks and floor drains
