New 5-acre industrial facility in Escondido creates few jobs

ESCONDIDO — Proponents have billed it as the first industrial building in over a decade in Escondido and one of the largest in the city’s history. But the newly minted Exeter Industrial Park will not create many jobs or even put the facility into the top 25 of employers in the city.

At more than 5 acres and 212,088 square feet in size, the newly opened facility is co-owned by the Pennsylvania-based Exeter Property Group and La Jolla-based Badiee Development.

The building sits as a behemoth within the city’s broader business park area and is located about a mile from Auto Park Way on Escondido’s west side at 1925 and 2005 Harmony Grove Road. The massive industrial space has been leased out to the Atlanta, Georgia-based logistics company Veritiv Corporation.

A publicly traded company (stock ticker symbol: VRTV), Veritiv pulled in $1.52 billion worth of profit in 2017.

Veritiv’s leasing tenancy of the building, however, was not made public until December 2017, well over a year into the regulatory process overseen by the city of Escondido.

A company with 8,900 employees nationwide and 170 industrial warehouses throughout the U.S., Veritiv spokesman Phil Taylor told The Coast News that the Escondido facility will create 29 jobs, with six truckers making delivers to and from the warehouse on the daily. And most of the jobs went to city residents.

Over time, those numbers could eventually rise because “San Diego is a growth area,” Taylor said. When asked about pay rates, Taylor said that Veritiv does not comment on employee compensation, but remarked that the company “pays competitive wages in every market.”

“As part of our efforts to maintain a leading position in the distribution industry, we regularly review our network needs in markets across North America,” Douglas DeCaire, general manager for Veritiv’s Southwest Territory, detailed in a statement. “We found that we needed a facility in the fast-growing San Diego market because it was no longer efficient to service the area from our warehouses in the Los Angeles area.”

Responding to a question about keeping Veritiv’s name under seal until December 2017, Jay Petrek, assistant city manager for Escondido, said “It is standard practice for private property owners to keep the names of prospective tenants confidential during the lease agreement negotiation process.”

“The project went through the required public process with opportunities for public input,” Petrek further explained. “Land-use regulations typically do not specifically include or exclude companies by name, only the ‘types’ of businesses that are permitted.”

Escondido Mayor Sam Abed, who is in the final throes of losing his re-election bid to challenger Paul McNamara, praised Veritiv in December 2017 when it was revealed as the tenant of the industrial facility.

“We are excited to have Veritiv locate in Escondido,” Abed said to the San Diego Business Journal at the time. “We’re proud to work with Badiee Development and Exeter Property Group to bring innovative commercial and industrial business to our city.”

Automation, private equity

As a company, Veritiv focuses on packaging, warehousing and logistics for various specialty market supply chain industries. It also has its own trucking fleet of over 1,000 vehicles through its subsidiary Veritiv Freight.

A prolific printer of paper products, as well as publishing and print publications management, the company says on its website that it’s 20 million square feet of warehouse storage serves the market supply chain for industries ranging from aerospace, apparel, appliances, automotive, computers and electronics, furniture, medical equipment, food and beverage, and others.

On Sept. 19, Veritiv announced that it had signed a deal with Amazon to become part of its Amazon Packaging Support and Supplier Network (APASS).

“APASS certification enables Veritiv to provide package-testing services in compliance with Amazon’s certified test methods directly to sellers, merchants, and manufacturers,” explained Veritiv in a press release announcing the deal. “Veritiv will bring additional value by helping sellers design innovative yet functional packaging that is intended to not only meet Amazon’s strict standards but also create efficiencies through lower damage and improved material sourcing.”

But due to advanced technology, the company does not need much manpower within its warehouses to get the job done.

On its website, Veritiv boasts that it uses automated equipment to do most of the actual packaging for products, which move from its facilities to the next phase in the supply chain. In its most recent annual report to its investors filed with the U.S. Securities and Exchange Commission, the company also discussed its automated facilities.

“Veritiv’s packaging professionals create customer value through supply chain solutions, structural and graphic packaging design and engineering, automation, workflow and equipment services and kitting and fulfillment,” wrote the company in that SEC 10K filing.

By way of contrast, Amazon recently announced it was opening an 85,000-square-foot facility in the University Town Center. Though roughly one-third the size of Escondido’s Veritiv site, it will create 300 jobs, or 10 times the number of jobs, according to reporting done by the San Diego Union-Tribune.

On its website, Badiee Development says that the Veritiv facility will “create high-caliber, high-paying jobs in Escondido.” In the initial recommendation to give Badiee Development a permit to build the project at that location in August 2016, the Escondido Planning Commission also said that the facility will create “diverse jobs for the community.”

Amazon and Veritiv “are two distinct and different operations. Amazon requires lots of hands to collect and ship small items. And the UTC area is located closer to the largest population center of the county with individual subscribers serviced by online ordering,” Escondido City Council member Ed Gallo said via email. “Veritiv is a distribution center of large products more suited to be handled by forklift operators, ergo fewer employees. The Veritiv site allows for expansion of the business, which no doubt will occur as the operation begins.”

Founded in 2014 as a corporation, the Veritiv Escondido facility opened in the aftermath of shuttering operations from its facility the Los Angeles-area in Los Palmos. The company also has a warehouse south of the U.S.-Mexico border in Tijuana.

Bain Capital, the private equity firm perhaps best known as the place at which two-time presidential candidate and soon-to-be U.S. Sen. Mitt Romney spent time as an executive, owns Veritiv on a 10 percent basis. The company denied comment for this story, deferring to Veritiv.

International Paper also owns a 10 percent stake in the company, as does the private equity firm Blackstone Group, according to insider holdings information published by the financial website Mergent Online.

Zone change, expedited permit

Prior to a Sept. 28, 2016, vote by the Escondido Planning Commission to change the zoning category to Planned-Development Industrial, the plot of land had a Single-Family Residential zoning designation. It sits just blocks from five different mobile home complexes.

The permitting for the process was moved through twice as quickly as usual, Badiee Development CEO Ben Badiee said. He added it was a testament to the business-friendly Escondido government.

“We have established a very good relationship with the City of Escondido and that helped move the project through the entitlement process very smoothly and ultimately through completion of the project,” Scott Merry, vice president of construction for Badiee Development, said in an email. “The City’s leadership created a collaborative framework for our team and City staff to work thru the challenges that arise on a project of this size and tight time frame.”

The tight time frame was also referred to in Escondido Planning Commission documents from January 2017, with city officials saying an “undisclosed potential tenant” had an interest in moving into the proposed facility, but to do so, things would have to be handled swiftly.

“The applicant is currently negotiating with an undisclosed potential tenant that is specifically looking for a building of this size that can be constructed expeditiously,” wrote Mike Strong, then the assistant planning director for Escondido and currently the secretary for the Planning Commission.

For its part, Veritiv said the location was ideal for its business model and it was satisfied with the quick turnaround on permitting.

“We selected this particular development because it not only met our current needs, but it also allowed opportunity for future growth in this market,” DeCaire said. “The developer was willing to build to suit our needs and in our time frame. The developer took care of all permitting and other logistics with the City of Escondido.”

One of the entities that aided in making that happen under that time frame was the firm Masson & Associates, which did the preliminary drainage analysis for Badiee Development submitted as part of the Environmental Impact Report process for the project. John Masson, president of Masson & Associates, serves as a City Council member representing District 2, an area just north of the facility.

Masson abstained from the proceedings during the debates and eventual vote over changing the land-use designation from Single-Family Residential to Planned-Development Industrial. The rest of the City Council voted unanimously, 4-0, to change the zoning designation.

Three of the four City Council members who voted on this measure — Olga Diaz, Michael Morasco, and Mayor Sam Abed — did not respond to request for comment for this story. Gallo, whose tenure as a City Council member appears to be coming to an end due to his probable electoral loss to Consuelo Martinez, addressed the situation by positing that the zoning “change was way past due after the growth of industrial property in the area.”

Strong, secretary of Escondido’s Planning Commission, said a ballot initiative vote taken and approved by residents of Escondido in 2012 gave the city of Escondido the ability to pull such a maneuver.

That initiative, Measure N, was up-voted by over 53 percent of the city’s residents. Measure N called for the city of Escondido’s General Plan to allow for this plot of land to be switched to its current designation.

Strong also said that he felt the consultation process surrounding the Veritiv facility was thorough, even if the name of the company occupying the site was not revealed to the public initially.

“At a project-specific level, as part of the environmental review for the (Veritiv) project the City mailed out notices to all property owners within 500 feet of the project site notifying them of the project and the draft environmental document was available for public comment,” Strong said via email.

“The City also mailed out notices to all property owners within 500 feet of the project site indicating the time/date of the Planning Commission and City Council public hearings. These notices also were published in the newspaper and public hearing notices (4×4) posted on the site,” Strong further explained. “The applicant also met separately with the adjacent property owners to discuss the project, project progress, and proposed improvements along the adjoining property lines, including the screen wall.”

That consultation process done by Badiee Development appears to have been outsourced to Community Strategies Group Inc., whose president is Linda Bailey, former CEO of the Escondido Chamber of Commerce, according to emails exhibited for a January 2017 City Council meeting.

“Consensus building is the process of creating, developing and maintaining community support for a real estate project within the sphere of influence of the proposed development,” explains Community Strategies Group of what it does on its website. “Community Strategies Group, Inc. (CSG) specializes in building consensus and public support on behalf of real estate clients. CSG has helped to generate public consensus for some of San Diego County’s most important real estate projects.”

Whether that consensus remains in tow for residents in the neighborhood with increased trucking traffic and noise, plus a lack of large-scale job creation at the facility, remains to be seen.