New Deal Offering: Clovis, CA

We are pleased to announce that we have placed 3375 Peach Ave, a 7.31 acre industrial outdoor storage (IOS) facility in Clovis, California, under contract. The property features an office building and a warehouse/shop totaling approx. 30,000 square feet. The purchase price is $8.35 million (total anticipated cost is $8.71 million) and we are raising $2.74 million in equity. We expect to close in early November.

1. Credit Tenant: The property is currently leased to AT&T (NYSE: T, S&P Credit Rating: BBB), an investment grade tenant and one of the largest telecommunications companies in the US. This location is AT&T’s largest field operations center in the Central Valley, with eight crew rooms, truck service bays, a truck wash, a training area, and enough parking for a large fleet of vehicles. This site is a mission critical asset for AT&T’s ongoing contracts to install, upgrade, and maintain fiber optic, cellular, and legacy copper data and phone lines.

2. Priced Below Market: We are acquiring the property at a 6.94% cap rate, which is higher than the cap rates for recent sales of other industrial facilities leased by AT&T.

3. In-Place Cash Flow from Acquisition: We expect $47,000 in monthly NOI on day one and will distribute cash in the first quarter following acquisition.

4. Compelling Returns and Depreciation: We forecast a 15.4% levered IRR and a 2.76x equity multiple (net to LPs) over an 8-year hold period, with limited leasing risk. Our upside case, in which AT&T exercises their first of two extension options and we sell the property shortly afterwords in month 23, forecasts a 23.4% levered IRR and 1.48x equity multiple (net to LPs). We estimate that the site will generate $0.60-$0.70 of year one depreciation expense for every $1.00 of equity invested due to the large amount of land improvements and the relatively low land values in the Fresno area.

5. Strong Downside Protection: The current AT&T lease runs through November 2027, and they have a three-year extension option followed by an additional two-year option, both with fixed 3% annual increases. The site is surrounded by properties owned or leased by Fresno County, presenting an opportunity for the county to complete its campus should AT&T vacate. If the County declined to lease or purchase the property, we would market it for sale or lease to other utility providers such as PG&E, Comcast, and their competitors.