Industrial investors selling today are making big returns, benefiting from a market that has rapidly grown over the last three years. Industrial investor CT recently capitalized off of the evolving market, selling a value-add industrial facility in San Diego to an owner-user. While the investor’s original business plan was to lease the asset after renovations, an owner-user offered to purchase the asset shortly after it hit the market. CT was able to secure significant returns from the disposition, profiting off of what it says was ideal market timing for a medium-box asset.
“The San Diego market timing was fortunate for us,” Carter Ewing, managing partner at CT, tells GlobeSt.com about the sale. “We were in the middle of rehabbing this project when this buyer came along. It was strategic for them and it was timely for us. We didn’t have much time on the market pursuing tenants for lease because the market wasn’t really ready to show. As a result, the investment returns were outstanding because we didn’t have any time on the market waiting for an investor to show up. We expected a lot more downtime.”
CT purchased the 339,328-square-foot property in a sale-lease back in 2015 for $34 million, and completed significant renovations to convert the property into a two-tenant asset. General Atomic Aeronautical Systems purchased it for $44 million with plans to occupy the second unit. While the property was originally marketed for lease, the quick offer from a buyer illustrates the heightened demand in the San Diego for industrial assets. “It was on the market for lease, and we were 60 days away from completing our improvements,” says Ewing. “The building hadn’t really been shown to potential tenants when a buyer came along and said they wanted to buy it. As part of our contract with our buyer, we completed the improvements. It worked out.”
While CT was strategic in its purchase, the momentum in the San Diego industrial market helped to create strong demand that resulted in a fast sale and healthy returns. Ewing says that it would be a difficult investment strategy to duplicate because the market dynamics have changed and property values have increased. “The broader market has really cooperated, and the broader demand for industrial space has in large part been a reason for the success of all of our competitors, as well as our own,” he explains. “We knew that there was going to be this need, and we set out to try to satisfy it. It turned out to be, fortunately, a great execution that everyone is really happy about.”