35,000 sq ft, (14) 2,500 sq ft units, metal exterior
Investment Report
Thesis
Overview
Small unit industrial is a good performing asset in economic downturns.
Stays fully occupied nearly all of the time due to high demand and low inventory of like product.
Very few, new small-bay building spaces (0-6,000 sq ft) have been created in the past 10 years.
The building was purchased with a projected net annualized return of 13.03%.
There is a light-rail stop that will be created a few blocks away within the next 10-15 years. This will change this building’s highest and best use to something with higher density.
The northwest Denver submarket for industrial has a vacancy rate of 1.7%, which is very low.
Broomfield County has not created any more industrial zoning creating the potential for strong demand.
Purchased September of 2018 for $2,650,000 ($75.71/ ft).
A note for 38% of the purchase price was initiated at 4.3% fixed for 7 years with a 25-year amortization
The building required $156,000 in capital improvements, for which the seller provided most of the credit at closing.
New parking lot
Helical piers in one unit to fix structural damage due to water
French drain to alleviate water drainage issues
New HVAC units
Risks
7 of the 14 units are up for renewal this year.
We will stagger leases going forward to reduce a potentially large amount of turnover.
Another risk is tenant credit. We are trying to improve credit for each time a unit becomes available.
OUTLOOK & EXIT
Work is still being completed to remedy all water issues on-premise.
The building is currently fully occupied.
The property is performing as expected with a forward projected net annualized return of 14.03%, which includes the leverage note.
The unlevered equivalent return is a weighted average annualized net 11.02%.
More Information
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