CapRock Brings Investment Full Cycle in One Year

Southern California industrial investor and developer CapRock Partners has brought a recent investment in Central Los Angeles full cycle in a year. The investor purchased the property, located at 5331 and 5333 Slauson Avenue, last year with a value-add business plan and an intention of holding the property; however, the existing tenant offered to purchase the property for an undisclosed amount. The short-hold and offer, however, serve as evidence of the strong industrial demand and need for space, particularly in the Central L.A. submarket.

“CapRock Partners is a flexible real estate investor and if an opportunity to sell an asset before the designated hold period emerges, we are always willing to consider it,” Taylor Arnett, VP of acquisitions at CapRock Partners, tells GlobeSt.com. “The tenant at 5331 and 5333 Slauson Avenue in Commerce, who has already occupied the property for several years, presented an offer to CapRock that made sense for both parties, where the tenant could own the property and secure its real estate long term, and CapRock could exit the investment with a profit.”

Initially, CapRock planned to divide the 97,000-square-foot, 4.32-acre property into two smaller buildings. However, Arnett says that CapRock liked the flexibility and options the property provided, and ultimately, that is what resulted in the quick success of the investment. “One of the attractive aspects of this deal though was the flexibility it provided, and we knew demand was strong for the property as a single building as well,” he says. “Our vision was to take advantage of the premium rents and/or owner-user sale prices for smaller units in the Commerce submarket once renovations were completed, but when the tenant presented an alternative, our team was happy to consider an option that was beneficial for all.”

The deal is a glowing example of the strength of the market, for both investment as well as owner-users. “Infill Central L.A. is one of the tightest submarkets in the U.S. The fundamentals are tremendously strong with vacancies hovering around 1.0%, and annual rent growth in the double digits,” says Arnett. “The tenant was in tune with the state of the market and recognized the utility that this building provided would be extremely hard to replace for its business.”

For owner-user demand specifically, Arnett expects demand to stay strong through 2019. “The limited supply of smaller industrial buildings that lend themselves to owner-users, and the amount of capital that is readily available from small business association lenders, backed by strong market fundamentals point to continued opportunity in this area,” he says. “Our team is always looking to create owner-user exit opportunities, whether that be through ground-up development, break-up plays or waiting out short-term leases.”

As a result, CapRock says that there are still quality value-add opportunities in the market, and the potential to complete another investment in this vein. “Although it can be challenging to find value-add opportunities in Central L.A. given the current dynamics of the submarket, CapRock Partners continues to stay bullish on industrial investments, while always being mindful of potential downside risks,” says Arnett. “CapRock Partners has already signed multiple off-market deals throughout the Western U.S. this year and we expect 2019 to be robust for value-add deals.”