Category Archives: Uncategorized

15401 S. San Pedro Street, Gardena, CA – 25,000 SF of Industrial for Sale – $6,500,000.

Building A – Front – 16,800 SF
Building B – North – 6,000 SF
Building C – Metal – 5,000 SF
2nd Story Offices – 1,763 SF
Lot Size: 60,000 SF

Completely Refurnished in 2016:
New Concrete Yard and Block Wall
New Power and Power Distribution –
New Fire Sprinkler
New interior dock-hi loading – 3 positions
New upstairs offices and on-site apartment
New Truck Scale
Many advanced automation and surveillance installed
Very Secure Facility
Large Concrete Yard.

For Sale at : $6,500,000.00

Please contact:
Jim Klein, SIOR
Klein Commercial Real Estate, Inc.

310-451-8121
jimklein@kleincom.com

15401 S. San Pedro St., Gardena, CA 90248 (unic. L.A. County) – 25,000 SF – For Sale – Preliminary

Building A – Front – 16,800 SF
Building B – North – 6,000 SF
Building C – Metal – 5,000 SF
New Upstairs Offices – 1763 SF

Completely Refurnished in 2016:
New Concrete Yard and Block Wall
New Power and Power Distribution –
New Fire Sprinkler
New interior dock-hi loading – 3 positions
New upstairs offices and on-site apartment – 3,000 SF
New Truck Scale
Many advanced automation and surveillance installed
Very Secure Facility
Large Concrete Yard.

For Sale at : $6,500,000.00

Please contact:
Jim Klein, SIOR
Klein Commercial Real Estate, Inc.

310-451-8121
jimklein@kleincom.com

European Opportunities for U.S Occupiers and Investors

 

I just returned from the SIOR European Conference in Warsaw, Poland. It’s my third visit to Europe recently and the most persistent trend is the expansion of big warehouse development. It’s leading to opportunities for U.S. occupiers and investors mainly due to the strength of the dollar.

I saw Professor Richard Baldwin, a leading expert on the influence of the Internet and communications technology on trade and production.  Industries arbitrage labor, capital, and technology across national boundaries to find the best profitable balance. New communication technologies for example, tele-presence, will make physical collaboration possible while being thousands of miles apart.  This will open up markets and allow for input substitutions to combat tariffs.

I learned that dealing in Europe is not much different than in the United States.  Cap Rates have the same relative spreads from primary markets to secondary. Below 5% in Paris, Madrid and Germany. Rising in Central Europe until reaching Moscow above 10%. In many of the strongest markets, it’s essential to add value to overcome low returns.

In Europe partly, but particularly in the U.S., we see mispricing in B and C markets. There is not enough consideration being paid to risk from tenant quality, short leases, and building conditions.  Historical spreads between A and B are 200 to 500 basis points. Today that spread has compressed to 50 to 200 basis points.  Space Scarcity, Excess Liquidity and the end of Quantitative Easing are the culprits. Smart buyers are returning to more conservative underwriting to make sure they are being compensated for conventional risks.

Logistics and Supply Chain closely resemble the U.S. by building to scale and establishing large ecommerce buildings that supply last mile destinations and production components. Development opportunities are similar where land is controlled long term and development for occupiers creates the value. Many European developers, especially in Central Europe, have large holdings in entitled industrial land but need valuable occupiers to capitalize.

Political Risk, something the Europeans know much better than Americans, is an important aspect. Because of almost universal transparency throughout Europe, political risk has so far been muted but there is still a premium that can be earned by having the right local partners and keeping a low, fixed investment mostly in the land. Corporate credits and a robust occupier market contributes to stability. Because of the strong dollar, purchasing power leads to discounts of 25 to 50 percent.

As in the United States, access to labor is a primary factor in location decisions. There is currently a mismatch between capital and labor. Capital prefers major markets, but industry wants to locate further out where labor availability and wages are lower. This is another opportunity for private capital to earn a calculated premium.

The current World Cup is the correct metaphor for our times. While countries will rival each other on the playing field, it’s the close personal relationships I have with my European SIOR colleagues that will overcome investment and location risks. As many of our clients enter the next phase of global convergence, more frequent communication with my SIOR peers will continue to be the source of many deals.

(Wish I had a better map but shows the influence of regional differences more than national. From the wall at the Polish National Museum in Warsaw, Medieval collection)

SnapSpace in Beta

We started a new site where Users can snap pictures of available space from their phone or PC and upload directly to the site.  It’s meant to work on a market-to-market basis because it also requires extensive “‘on-the-ground” support so Users know about the service. We are testing it in Gardena first. Space providers can offer directly to Space Occupiers. You may need a log-in which you can obtain at http://54.175.202.223/. Currently we are only at a Beta test so forgive the design. The key features combine Geotagging with the Geofield module so space is both posted on the map and in the Listing Section simultaneously. Works on all mobile devices. No third party intermediary is required.

Many Tenants and Property Owners are sitting on unused or underutilized space. We provide an easy outlet to reach Space Users who will pay market rents for any type of industrial space. Either you or I can post the space directly And we will bring you a qualified tenant at market rents. Warehouse, manufacturing, truckyards are our specialty. All sizes and lease terms.

SIOR Industrial Committee – 2nd Virtual Roundtable (via teleconference) – June 7

ANNOUNCEMENT

SIOR Industrial Committee – 2nd Virtual Roundtable (via teleconference)

Thursday June 7, 2018 – 8AM Pacific; 9AM Mountain; 10AM Central; 11AM Eastern (International Members Welcome)

Dear Industrial SIOR,

You are receiving this announcement because you have participated in a SIOR industrial event over the past year. As part of the Committee’s mandate, structured networking among SIORs is a primary goal. To that end, we will be holding our second Virtual Roundtable on the date above. Each table is limited to eight participants so everyone can speak.

The call is targeted at 45 minutes and no more than 60. The time will be divided into three, not necessarily, equal segments:

  • General Market Conditions – Everyone has a turn
  • Are there space shortages in your market? And are there investment/development opportunities?
  • Problem Solving: Share a problem in your business that other SIORS on the table can help you solve?

Concurrently, we are collecting National Industrial Cap Rate data for a forthcoming publication where you will receive credit for your contribution and a complete data set you can use for your own business/publications.

Please respond to the following five (5) questions: (can all be one line for simplicity and we will parse the responses.)

Can you attend the Virtual Roundtable?
(If yes, call information and more instructions to follow)

Metro Area?

Cap Rate for A* Product in your market?

Cap Rate for B** Product in your market?

Will you be a Virtual Table Leader?
(Requires a Conference Call account for you to host)

*A Product is institutional quality, newer development, credit tenants, Build-to-Suit
** B Product is functional, older, shorter term leases, opportunity/value-add

 

 

Industrial Building Portfolios – In Heavy Demand

Industrial Building Portfolios, $50MM and greater, are where the action is today. Institutional investors need scale and the only place to find it, as far as industrial, is in the portfolios of National Operating Companies and Private Partnerships. Institutional Investors stand between the real estate and fixed obligations to satisfy pension, insurance, and retirement plans. It’s major financial plumbing and as the obligations grow so does the need for product. Roll ups, a familiar consolidation vehicle in corporate America, is now the preferred way for large real estate investors to buy. Unknown to many, national industrial building ownership is consolidating and almost all local developers/investors sell into these relatively few pools as a final exit.

In order to obtain more income, institutional investors have different strategies. Purchasing brand new developments is a popular way to buy yield. New to the field, are sub-institutional quality buildings, also called “B” and “C”. On its own, a single “B” or “C” asset, may not garner much institutional interest, but as part of a larger portfolio, the property trades at a very low margin. There is strong financial support for proven cash flow in infill markets, even if the buildings are older. Average vacancies across portfolios and the cost to operate these buildings are low.

In Los Angeles, and a few other markets around the U.S., small investment partnerships and family owned businesses have seen the value of their real estate explode. The portfolio effect is one reason, but the real estate itself, often located in rough industrial, is the beneficiary of urban economics and distribution networks. Formerly junky industrial buildings are fetching institutional quality prices.

Outside of major markets, the logic is much the same although prices tend to be a lot lower. Infill industrial, freight hubs and key logistic locations are the valuable pieces that make up a larger portfolio. Many private operators have spent a generation or two expanding these building networks to where the whole is worth more than the pieces. No matter how the investment partnerships and operating companies were formed, the buildings are analyzed for their cash flow potential.

Why now? Not only do portfolio values increase through aggregation, but there are also positive pricing effects due to consolidation. Portfolio theory demonstrates that there are rewards with larger scale. Lower costs of administration and management benefit beneficiaries directly. Scale, across a broad set of assets, reduces cost and expenses.

Big Data, particularly national parcel data, has an important effect on Portfolio Management.  Big Data and Analytics increase the ability to seek, analyze, and close on big industrial building holdings in very short time frames. This creates a layer of liquidity that is new for industrial building assets of this type. Because of Big Data sets and large values, the game has taken on new dynamics. For one thing, Occupiers have unprecedented advantage to leverage occupancy with ownership that yields tangible benefits. For portfolio owners, it’s the speed to monetize large asset pools that is a significant new innovation.

On the Buyer side, the top tier of industrial buyers is limited to a small handful of REITs, Insurance Companies, and  Private Funds who can write a check for $50MM or greater.  Below the top tier, there is a spectrum made up of different buyers and deals. Opportunistic, credit lease, multi-tenant, or tenant-occupied each have applications to larger pools and it is often the developer’s place to help the investment fit. In capable hands, a rough-hewed older industrial building can be turned into a well performing part of an institutional portfolio as long as it is bought correctly on the Spectrum.

Geography is another way large investors make price adjustments on the fly.  Certain major markets establish an index based on market size. Los Angeles, New York and Dallas are primary benchmarks. Other markets are adjusted accordingly into a national matrix. While these indexes are based on real numbers, thin trading in smaller markets leads to mispricing. As data improves and more experienced local analysis makes its way to decision makers, the business of large portfolios is more transparent. Knowledge of U.S. markets, access to product and personal relationships with leading investors make large industrial assets more liquid and valuable than ever before.

We advise, we sell, or we bring in our own deal. Please let us know if we can help with your Industrial Building Portfolio.

Thanks for Subscribing,

Jim Klein, SIOR

310-451-8121

jimklein@kleincom.com

PS: Participation Available in Industrial Syndication – Infill Los Angeles

(If you want to be removed from this mailing, please respond and we will immediately delete you from our database)

Race for Space – The New Dynamism

Dynamic pricing is becoming a greater influence on space leasing and building sales. By dynamism, I mean fluctuating rents separate from conventional underwriting.  A “spot market” is emerging to satisfy demand for smaller, flexible, and elastic spaces. Many examples include Truck Yards, Warehouse Sharing, Creative, Cannabis, and other categories of sub-space where “street rents” are disconnected from contract rents.  WeWork and Amazon are two primary examples that contract with the Landlord at one rent, and lease out space bits at higher rents. Public Warehouses, Self-Storage, Swap Meets, Studios and Truck Yards operate along the same model by collecting additional rent by offering “alternative occupancies” with varying degrees of added services. The revolution is any building can be pieced out especially with easily acquired technology that can create “smart” buildings for automation, surveillance, and access.

Dynamic pricing is buttressed by space scarcities and rent surges. The L.A. Harbor is a perfect case where proximity, drayage costs, and labor unrest, results in dynamic fluctuations partially geared to seasonality but more to sheer demand. Unused yard areas that can be repurposed for truck parking are going for $.35 per foot and warehouse sections are approaching $1.00.  Long standing tenants and family owners are the primary beneficiaries by subbing out their unneeded space.

We sold this 25,000 square foot building two years ago to a Chinese investor and he created the closest example I have seen locally to a “smart” building. In order to sustain autonomous production, he installed 100% IP surveillance cameras, automatic doors and levelers, new power, fire sprinkler and Wi-Fi throughout. Because it is a 24-hour operation with robots, the owner built a small apartment upstairs so the entire operation can be centrally monitored and controlled around the clock. The building itself becomes a major input to the production process. In addition, once the electronic infrastructure is in place, sharing is simple.

Runaway Pricing:

Dynamism is just as clear in the scramble for investable assets. Many small partnerships or family businesses find themselves sitting on incredible wealth from secondary industrial properties they have acquired through a long, productive business career. Particularly in Southern California, the combination of high rents, low cap rates, upside potential, and high dollar values have attracted the largest investment funds to the region. Not because these are terrific buildings, but “B” and “C” buildings generate strong cash flows, in great markets, and can sustain reliable income. Investors receive a slight premium with steady performance and dynamic increases with hands on operations.

One opportunity for Owner/Users is the high price of Los Angeles real estate, soon approaching $200 per foot. It enables them move to Inland Empire, Las Vegas, or Phoenix, all quickly becoming a part of Greater Southern California. Many local companies can improve their operation at greater savings and still have a hefty profit left over. While I hate to see business decamp from Los Angeles, no one has a better national network of experience to accomplish a seamless, “pick up and move” strategy than I do.

Dynamic Trading Network

As speed ramps up, it will be important to have the platform keep up with dynamic space trading.  More and more it will be discrete electronic networks that will replace word-of-mouth and informal communication. Public Listing Services will always have a place, but the “electronic whisper network” is a practical solution to transact deals rapidly and still keep offerings confidential when necessary. Torrent networks, Slack, and RocketChat are a few of communication tools we are exploring. In addition, we want to replace the lumbering process of “papering” a deal by using faster agreements. For now, AIRCRE forms combined with a paralegal service based in India is allowing us more time for deals but is not the ultimate solution

Building a strong Digital Operation is the only way to maintain parity with dynamism. In our work stations, we combine field video, parcel information, and Salesforce leads to search for space deals that would otherwise not be “on the market”. In essence, we are creating space through Search and Spot Pricing.  Because of the velocity, we can often deal the space faster than listing it. While still crude on our end, Digital Operations is a remarkable return on investment. For the first time, customers are investing alongside of us to create richer communication and data platform to see those deals.

Please let us know what we can do to help.

Jim Klein, SIOR
310-451-8121
jimklein@kleincom.com

101-109 W. Foothill Blvd., Glendora, CA 92807 – 5980 Square Foot Retail Investment – $2.25MM

5 Unit Retail Building at Signalized Corner of Foothill Blvd and Glendora Avenue
Annual Rent: $131,132.00
Expense Est.: $40,000.00
NOI: $91,132.00
Cap Rate: 4.05%

Asking Price: $2,250,000 – All Cash

Free Public Parking Immediately Next Door

Please contact Jim Klein, SIOR,; 310-451-8121; jimklein@kleincom.com