Cubic Offers San Diego HQ for Sale-Leaseback

Cubic Corp., a defense and transportation contractor, is offering its headquarters campus in San Diego for a sale-leaseback deal that offers to redevelop for industrial use a portion of the 26-acre property.

The company’s campus includes five buildings encompassing 514K SF. The buildings currently are used as offices, labs, R&D and manufacturing space.

CBRE is listing the property, expecting bids to approach $200M, a $389/SF valuation that would give a buyer an initial annual yield of 6%, based on a projected $12M of net operating income, according to a report in greenstreet.

Cubic is planning to sign a 10-year, triple-net lease for 314K SF, with 3% annual rent bumps and two five-year renewal options. The lease would encompass two three-story buildings that were completed in 2020 and a one-story manufacturing facility, the report said.

The campus is located at 4285 Ponderosa Avenue in the Kearny Mesa submarket of San Diego.

Cubic plans to vacate two older buildings on 7.7 acres on the campus and give the buyer the opportunity to redevelop that parcel. According to CBRE’s marketing materials, the site is suitable for a 165K SF industrial facility in the tight Central San Diego market, which has averaged nearly 97% occupancy since before the pandemic.

Cubic, which has been a Pentagon contractor since 1951, currently is using the older buildings as labs containing what is known in military and intelligence circles as “sensitive compartmentalized information facilities,” or SCIFs, which are protected spaces in rooms where classified information is divulged.

Cubic is planning to relocate the SCIFs to its newer buildings. During the transition, the company will lease the larger of the two older buildings, encompassing 102K SF, while vacating a 98K SF building.

Cubic’s campus includes 1,900 parking spaces equipped with 61 EV charging stations, a café, basketball and pickleball courts, a fitness center and an outdoor picnic area with grills and an amphitheater.

Vacancies in the San Diego industrial market stood at 2.9% as of the end of Q3 2022 with quarterly net absorption of 416K SF, according to a marketing report from Newark.

Land sales for future industrial development peaked between the fourth quarter of 2021 and first quarter of 2022, which saw $257M and $219M in industrial land sales, respectively.