Last week I wrote about our most recent acquisition in Elk Grove, California. We bought 24.48 vacant acres in a secondary market outside of Sacramento and it was an openly marketed deal.
From the surface, this doesn’t seem like a home run.
- Openly marketed
- Fully vacant
- Secondary market
- California
I think investors are overly focused on deals being off market. Don’t get me wrong, we love an off-market deal. However, it’s not the only way to find a good deal.
First, the seller is much more likely to transact in a broadly marketed deal, so you are less likely to spend a bunch of time on something that was never going to happen.
Second, even broadly marketed deals can slip through the cracks of deal teams that are evaluating hundreds of deals a year. We find that this tends to happen more so in under the radar secondary markets in California, some of which are very good markets.
Third, if you know the market cold, you can come up with a better business plan than your competitors, especially when there is a value-add component.
Now that we’ve leased the improved portion of the property, we plan to pave the unimproved 12 acres and add one or two 10,875-square-foot shop buildings. Once we lease the entire site, we expect an extremely strong yield on cost.
Deals like this do not come along often: a long-term lease in place on day one and 12 acres left to improve with a built-in cost advantage from the in-place lease. This is exactly the kind of deal we built our IOS platform to find, and we could not be more excited to have this one closed.
