TUSTIN, CA—Staying ahead of the pack in acquiring land is nomean feat for California developers,Bridgeport Investments' founding principalRandy Bramel tells GlobeSt.com. “The smartest,most creative and willing to work hardest capture the gold.”

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As GlobeSt.com reported earlier today, GlobeSt.com spoke withBridgeport's founding partner RandyBramel about what it takes to execute complex or“hairy” deals for industrial developers and howfinancing hurdles can be overcome. Here, wecontinue our interview by discussing challenges and opportunitiesin land acquisition.

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GlobeSt.com: How areindustrial developers looking at land acquisition since there's somuch competition for available land?

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Bramel: There is a lot of competition.Prices have escalated above any of our expectations over the last18 to 24 months, and developers have to get ahead of themarketplace and ahead of the pack. With the two buildings inRialto, CA, for which we arranged financing for CapRockPartners, they tied one of them up in early 2013 and beganchasing the other one in early 2013 and got ahead of the market.They captured a good opportunity. Some developers are working onoff-market transactions based on relationships. They have to work alot harder to come up with good projects for a reasonable price.Because equity investors want to have projectsthat are close to being ready for construction anddon't want to take a lot of entitlement risk,developers are tying up long escrows on the land but have to havethe money to be able to get the project entitled. If they can closeon the purchase of the land without entitlements, it's possible todo those transactions, but they're hard to do. There are no magicanswers to those questions. The harder you work, the luckier youget.

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GlobeSt.com: How is land acquisition beingapproached in infill markets vs. markets like the InlandEmpire?

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Bramel: Most of the industrialdevelopment that has been done over the last couple of years hasbeen big-box industrial in the Inland Empire for lease, as opposedto under 500,000 square feet. Part of that is because that's wherethe equity capital has been interested in doing deals and the landfor buildings that size was available. In infill markets like L.A.and Orange County, it's very difficult to build big boxes thatsize. There's a pent-up demand for 10,000-square-foot up to200,000-square-foot small and mid-sized buildings. That's thenature of product that prevails in the infill markets. Part of thechallenge there is that many of those buildings in infill marketsare either not big enough or not for lease—they're for sale—and abig source of institutional capital wants larger buildings forlease. There's a shortage of capital for the infill markets, butpositive demand will draw capital to it. The absolute magnitude ofthe profit is not necessarily big enough for them. The returns arelower, but the risks are lower, as well. Prior to the marketturndown in 2008, we financed several million square feet ofindustrial in LA and Orange County infill markets, withhigh-net-worth private investors. Part of the challenge today isthat construction debt levels as a percentage of total cost ofproject is notably less—it now requires quite a bit more equity than prior to the market turndown.

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Carrie Rossenfeld

Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.