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Monday, 12 February 2018

Calif. Investment Firm Plans to Buy, Sell About $250Mln of Industrial, Office Properties This Year

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Commercial Real Estate Direct Staff Report

CIP Real Estate plans to be aggressive this year in repositioning its portfolio of industrial and office properties.

The Irvine, Calif., investment company expects to spend about $150 million on value-add properties and sell about $100 million of stabilized assets. It will use proceeds of its sales to fund acquisitions, as well as mortgages obtained through banks or life insurance companies.

CIP is targeting properties in California, Nevada and North Carolina, markets in which it currently has a portfolio of some 3 million square feet of industrial space and 1 million sf of office space. The company, which was founded in 1995, hopes to increase occupancy rates and rents at the properties it acquires through upgrades and renovations.

It already has agreed to buy an industrial park in Las Vegas, and anticipates the sale to close by early next month. Most of its acquisitions will be industrial properties, but it will also purchase office assets when the opportunity arises. It often targets properties with multiple tenants in areas that have a limited supply and not much development planned.

"The rarity of the product is very attractive, and we think the returns are attractive," said Eric Smyth, the company's principal. "We're trying to buy more of that in markets where it's difficult to reproduce."

Meanwhile, the company currently is under contract to sell between $30 million and $40 million of properties this quarter. Properties it's selling are older assets that have been upgraded. It typically holds assets for three to 10 years.

"The (properties) we'll be selling we've owned for quite a while, so they're at the end of their ownership windows," Smyth noted. "The ones we're buying we think have more work to do. Hopefully, we'll be able to add value to those properties."

CIP teams with institutional investors in nearly all of its deals. Its investment partners have included Alex. Brown Realty Inc., Oaktree Capital Management, Guggenheim Partners and CrossHarbor Capital Partners. Last year, its venture with Guggenheim sold four buildings with 400,976 sf in the Empire Towers office complex in Ontario, Calif., for $78.5 million; and a venture it has with Oaktree sold a portfolio of 13 industrial, flex and office buildings with 671,000 sf in Las Vegas for $92 million.

The company sold about $250 million of properties last year.

Meanwhile, CIP purchased about $40 million of properties in 2017. Its largest deal was a $27.1 million purchase of the Eden Landing Business Park in Hayward, Calif., in a venture with Alex. Brown. Wells Fargo provided an $18 million mortgage against the property, which consists of 10 office and industrial buildings with 195,004 sf.

The venture plans to spend $2 million renovating the property, its first in northern California. Eden Landing is about 85 percent occupied, but Smyth noted that most of the tenants pay rents that are below market rate.

"We're hoping, through renovations, we can increase the occupancy and also increase the rents up to current market (rates)," Smyth said. "That's a very tight market, so we think there's a lot of rental growth opportunity there over the next five or six years."

Comments? E-mail Tim Casey or call him at (267) 397-3347.



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Additional Info

  • Syndicate to Realpoint: No
  • Sector: Industrial, Office
  • Subject: Institutional Investment (INS), Property Acquisitions (ACQ)
  • Private: No
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Data Digest

 

CMBS DELINQUENCY VOLUME

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CMBS SPECIAL SERVICING VOLUME

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Top Bookrunners Domestic, Private-Label CMBS - 2017
Investment Bank #Deals Vol$mln MktShr%
Goldman Sachs 17.59 11,819.34 13.68
JPMorgan Securities 14.52 10,968.11 12.70
Citigroup 12.04 10,012.71 11.59
Wells Fargo Securities 14.02 9,936.06 11.50
Deutsche Bank 12.55 9,879.74 11.44

 

RCA CPPI

 

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CMBS 2.0 Spreads

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Top CMBS Loan Contributors - 2017
Lender #Loans Vol$mln MktShr%
Goldman Sachs 146.89 11,719.34 13.63
JPMorgan Chase Bank 117.68 10,114.14 11.76
Deutsche Bank 198.48 9,689.97 11.27
Morgan Stanley 166.18 8,539.78 9.93
Citigroup 199.05 8,088.24 9.41

 

 

 

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