Avistone is pleased to announce in October of 2013 the acquisition by Avistone Northern Highland LLC of the 62,000 square foot Watt 80 Business Park located in Sacramento, CA . This investment offered a healthy average annual cash on cash yield to the investors of 9.26% and an estimated annual return on investment (IRR) of 15% projected over the 5 year investment horizon. The company was able to negotiate an acquisition price of $5,300,00 ($84.63/sq ft) which represents approximately 70% of current replacement cost.
Dan Culler, a Principal at Avistone stated that “purchasing multi-tenant industrial property at prices below replacement value in growing markets enhances the appreciation potential of the property because as new construction comes on line it will produce upward pressure on rents and valuations. It also reduces the risk of downside depreciation.” Occupancy of Watt 80 was 91% at the time of sale in a market that is expected to experience significant growth over the coming years thus offering investors the potential of a bright future. The investment meets Avistone’s investment criteria of optimal mix of yield, return and risk.
The Sacramento area for industrial and business park properties is very high on Avistone’s list of interesting markets. California is now running a budget surplus, which is good news for the City and State. In addition, the recently enacted Resources Reform and Development Act of 2014 is a major game changer for the Sacramento market. Among other things, it authorizes the U.S. Army Corps of Engineers to proceed with a $600 million to $1 billion project to finish the river levee work on the Natomas basin (Sacramento and American Rivers), with work slated to begin in 2015. Because this levee work has been badly needed to meet the community’s water requirements, Sacramento enacted a building moratorium several years ago that halted numerous residential projects in the region. Now, with passage of the Act, the city is seeking to lift the moratorium, thus allowing major construction projects to start and to resume… all of which bodes very well for the region’s economy; and in particular, firms in the construction and housing trades – building contractors, construction material suppliers, household goods suppliers and supporting industries will require flex space in business parks. Further, we expect the eastward flow of businesses and residents from the high-priced San Francisco Bay area to continue and pick-up steam with the end of the moratorium.
Avistone is a real estate investment management firm that specializes in the acquisition of high-yield, multi-tenant industrial business parks located throughout the U.S. We target stabilized properties that can be acquired below replacement cost in growing markets that also have healthy cash flow, which improves the risk profile of these investments.
Our principals have over 50 years of combined experience acquiring and managing commercial real estate investments on behalf of individual and institutional investors. Avistone’s expertise is the acquisition and management of commercial real estate that optimizes yield, return and risk for our investors.
Investment units in the Watt 80 Business Park, priced at $25,000 each, are sold out. Investment units in the Meridian Gateway Business Center, priced at $50,000 each, are sold out. If you have interest in Avistone’s future investment offerings, please contact us at [email protected]
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