Investment Snapshot
Property Information
Property Type
Industrial Park
Size
108,690 SF
Year Built
1944
Market
Sacramento, CA
Sourcing
Off-Market
Acquisition
Acquisition Date
June 2021
Purchase Price
$8,535,000
Invested Equity
$3,450,000
Debt (% LTC)
70%
Type of Debt
Regional bank with five-year fixed rate financing of 3.5%, three years interest only with additional $1.2 million of future funding
Going in Cap Rate
4.5%
In-Place Rent
30% below market
Disposition
Hold Period
23 Months
Disposition Date
May 2023
Sale Price
$12.55 million
Exit Cap Rate
6.0%
Realized Gross IRR
33%
Realized Equity Multiple
1.70x
Investment Overview
Deal Sourcing
A debt broker who had the relationship with the sellers brought the opportunity to us
Property Type
108,690 SF industrial park
Year Built
1944
Occupancy at Acquisition
100%
Location
Located directly north of the 244-acre mixed use Railyards development which is less than two miles from Downtown Sacramento
Attractive Opportunity
The property was owned by the same family for over 70 years and was neglected from a management perspective with in-place rents 30% under market at acquisition. The property also sat on a 4.85 acre site which provided a long-term redevelopment strategy.
Value-Add Strategy
CapEx Requirements
Exterior paint of entire building, offices built out of second floor tower that had not previously been occupied, roof and skylight repairs, parking lot repairs, fencing repairs, electrical upgrades and panel replacement
Anticipated Hold/Actual Hold
Five year underwritten hold, two year anticipated hold
Added Amenities
Acquisition of adjacent land parcel to lease out excess trailer parking for tenants
Additional Revenue Sources
Created 2,000 SF of leasable office space in second floor tower which previously had been unleashed and used as owner’s storage
Acquired 15,000 adjacent parcels and leased to tenant for trailer parking
Renewed all five tenants that were in occupancy at acquisition at market rents and converted from gross leases to NNN recoveries
Rent Strategy
Rents were underwritten at 30% below market but leases ultimately were signed 75%–100% above in-place rents. These lease renewals were all executed within two years of acquisition.
ESG Opportunities
Adjacent land acquisition provides additional on-site truck parking which will reduce emissions from trucks having to drive to neighboring parcels to park. In addition, LED lights, low VOC painting and drought tolerant landscaping were completed.
Exit Information
The asset is currently being marketed for sale and expectations are that there will be high interest from individual and family office buyers.
Anticipated Returns
Acquisition Price $8,535,000 ($79 PSF)
Anticipated Sale Price $12,500,000 ($115 PSF)
Anticipated gross IRR 31% / Net IRR 23%
Anticipated MOIC 1.50x / Net MOIC 1.50x
