Investor Harsch acquires Speedway Industrial Park

Jennifer Robison

Thursday, Dec. 13, 2001 | 10:34 a.m.

Harsch Investment Properties has purchased the Speedway Industrial Park at the Las Vegas Motor Speedway from Bruton Smith for $44 million.

The 1.4 million-square-foot industrial park brings Harsch's Southern Nevada holdings up to 5.1 million square feet of space.

Margie Campobasso, a spokeswoman for the Portland, Ore.,-based firm, said the company plans some changes for the North Las Vegas-area park, including a new name: Speedway Commerce Center.

In addition, Campobasso said Harsch would boost the property's curb appeal with some landscaping upgrades scheduled to begin in January.

Rick Smith, a local real estate analyst who is president and chief executive officer of RDS Associates, said aesthetic improvements are a standard Harsch approach to new acquisitions.

"Harsch tends to operate properties in a first-class manner,' said Smith, whose firm develops industrial, office and flex space in North Las Vegas. "You'll see them immediately take obvious steps to improve the appearance of the property and review operating costs.

"This is very typical of Harsch," Smith said. "They buy Class C properties with A-plus cash flows and return on investment. They're value-oriented buyers, and this is a good example of their strategy. They are long-term owners of commercial real estate. They're not looking to come in and buy something and flip it two or three years later to another owner."

Despite the faltering economy and an accompanying reluctance among businesses to make major investment decisions, Smith said he's not surprised to see a transaction of this magnitude.

"We continue to have a strong industrial market here. Barring some type of catastrophic event that would change the national scene for the worse, I think you can pretty much plan on business as usual."

Mel Koich and Scott Owens, industrial brokers with Lee & Associates, represented both Harsch and the park's seller, Bruton Smith, in the deal.

Koich said Harsch had been considering the purchase for about two years, but the park failed until recently to generate enough income to make it an attractive investment.

"It was never at an income stream where it made any sense," Koich said. "The park was at 20 percent (leased), but now we're at 87 percent."

"The occupancy was at a point where it looked better for us," said Harsch's Campobasso of the firm's caution in buying the park.

Occupancy at the center was slow to pick up for two primary reasons.

First, the 27 buildings weren't configured according to traditional industrial uses -- they were initially designed to accommodate automotive research and development. Low ceilings and a scarcity of loading doors challenged manufacturing and distribution companies seeking warehouse space.

Second, when casino magnates Ralph Engelstad and Bill Bennett built the speedway and park in 1996, the location was too far-flung to appeal to distributors.

The center's change in fortune came via intensive marketing efforts that began in 1998 when Bruton Smith's Speedway Motorsports Inc. bought the speedway and its accompanying industrial park from Engelstad and Bennett.

Speedway Motorsports immediately put the industrial park up for sale, but found no takers willing to pay above $30 million.

As the property languished, it dragged down earnings at the speedway. The company posted a $4.8 million loss in the third quarter of 1999; Speedway Motorsports blamed the industrial park for $1 million of that loss.

In January 2000 Speedway Motorsports sold the park to Smith, the company's chief executive, for $53 million.

Smith, whom Koich said "was never enamored with owning an industrial park," sought aggressively to lease up and dispose of the park.

Though the park was conceived as an R&D site for motor sports teams, its 129 tenants now include cabinet manufacturers, exercise equipment distributors, electrical and roofing contractors and woodworking firms.

Its largest user is specialty auto manufacturer Shelby American, which occupies about 200,000 square feet at the center.

Speedway Motorsports still owns the Las Vegas Motor Speedway, and Smith remains in control of 280 acres of land across the freeway from the track.

Harsch's seven-state portfolio now totals about 10 million square feet valued at $1 billion. Half of the firm's portfolio is in Las Vegas.

"So many businesses and startup companies are moving here," said Campobasso of Harsch's interest in the market. "We want to have something to offer."

Locally, the company also owns the Henderson Commerce Center, the Center at Spring Mountain and Desert Inn Business Park.