Canyon Cottage Apartments

1401 Landing Page Dr
Spanish Fork, UT | Multi-Family

Opportunity Summary

This investment is a 3.24-acre heavy industrial zoned parcel with a +/-34,679 SF composed of a parts showroom and service bay for heavy-duty trucks as well as a showroom and distribution warehouse for a parts supplier for the refuse industry.

Properties of this size and zoning with additional yard space are highly sought after. The demand for these types of properties greatly exceeds available supply in the Phoenix metro, and there is almost no new inventory being constructed, especially within this submarket.

The supply/demand imbalance coupled with the significantly below market rents make this property a tremendous investment opportunity for us and our partners.

Key Information

  • Purchase Price: $3.8 Million
  • TI/Leasing Budget: $115,000
  • Equity Required: $1.6 Million
  • Close of Escrow: 6.11.2021
  • Zoning: A-2 Heavy Industrial
  • IRR: 23.34%
  • Year 1 Cash on Cash Return: 2.08%
  • Year 1 Return w/ Debt Pay Down: 4.69%
  • Purchase Cap Rate/Stabilized Cap Rate: 6.5%/9.4%
  • Est. Loan Term: 5 YR, 25-YR Amort.
  • LTV: 65%
  • Estimated Loan Rate: 4.0%
  • Deal Time: 2 Years

Property Details

  • Buildings – 3
  • Building Size – 34,679 SF
  • Lot Size – 3.24 Acers
  • Zoning – A-2 Heavy Industrial
  • Market – Phoenix, AZ
  • Major Cross Streets – 16th St. and University Dr.
  • Freeway Access – I-10 and I-17 within 1 block
  • Year Built – 2008/1970
  • Paved and Secured Yard Space
  • Heavy power, overhead crane, oversized truck doors, 20′-24′ clear height, fire sprinklered

Business Plan

University Drive

1626 & 1646 E University Dr. Phoenix, AZ | Industrial

We are purchasing this property with strong income in place from the existing tenants, TruckPro and Wastebuilt. TruckPro’s lease is a NNN lease of approximately 25,000 SF of structure and a majority of the yard space and currently provides $172,621.20 annually. This equates to an approximate $.58/SF/month NNN lease rate. Wastebuilt’s lease is a NNN lease of approximately 10,000 SF of structure and some parking space and currently provides $74,520.00 annually. This equates to an approximate $.62/SF/month NNN lease rate. The combined lease rate is approximately $.59/SF/month NNN. We are currently seeing lease comps at market rents for smaller low coverage buildings such as this one trading in excess of $1/SF/month

TruckPro’s lease currently provides them one (5) year option to renew their leases at market rate. As part of their lease option, the landlord dictates what market rents are. If the tenant disagrees, it is a very difficult process for the tenant to dispute the lease rate the landlord proposes. TruckPro’s lease expires in approximately two years, at which point they can exercise their option to renew their lease. Wastebuilt’s lease ends in just over two years, at which time we will bring them to market rates as well.

We anticipate both tenants remaining at the property with the rental increases, as the tenants know they will have an extremely difficult time finding a similar product to lease at the lease rates we are proposing due to limited inventory in the Phoenix market. If either tenant decides not to renew, we have budgeted money for property improvements as well as a leasing fee for our broker who would assist us in locating a new tenant for the property in this situation. We know we will be able to release the property quickly to a new tenant for significantly higher rents due to the current lack of supply for this product type.

We see the opportunity to reposition the property by increasing both of the existing tenant’s lease rates upon exercising their options and then exit for a significant profit. We have modeled the returns we are achieving by renewing both leases at $.85/SF/month, which is a conservative blended lease rate for this property type. As mentioned previously, we are seeing lease rates for this product type in excess of$1.00/SF/month.

Returns Overview

Underwriting Scenarios

We conservatively underwrite all of our projects in an attempt to under promise and overdeliver. We also compare our conservative underwriting to three different scenarios. The first scenario, the 20-Year Avg. Growth model, incorporates the average annual rent growth and cap rate compression that has occurred over the last 20 years in Metro Phoenix for each year of the investment period.

The second scenario, the Last Year Growth model, incorporates the average annual rent growth and cap rate compression that has occurred over the last year in Metro Phoenix for each year of the investment period. The third and final scenario, the Great Recession model, demonstrates how the asset would have performed if theGreat Recession started the day after we closed and continued its downward trend during the investment period, which includes cap rate expansion, decrease in market rental rates, and 12 months of vacancy.

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Returns Overview

Underwritten Projections

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High-End potentail model

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Location

University Drive

1401 Landing Page Dr.,
Spanish Fork, UT

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Tenant Information

TruckPro

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TruckPro

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Company Overview

Hanson Capital Group is a team of commercial real estate experts with a combined 50+ years of experience in the industry, offering a unique approach to investing in commercial real estate. We manage over $50mm in equity and oversee over $125mm in assets.We specialize in value-add multifamily, industrial investment product, and industrial and multifamily development, opportunistically shifting our focus from one specialty to another in order to capitalize on market inefficiencies as they present themselves. This diversified approach to investing provides the flexibility necessary to navigate complex and evolving market conditions and market cycles and affords us with the ability to stay several steps ahead of trends and potential headwinds.

We are on the path to building a $100mm+ portfolio of industrial investment product over the next twelve (12) to eighteen (18) months. We have developed a proprietary system for sourcing and securing off-market industrial investment product (including establishing programmatic broker agreements to ensure that we are the broker’s first call on deals that meet our investment criteria) which provides unprecedented access to deal flow. Our primary focus is on the Phoenix and Dallas-Fort Worth metropolitan statistical areas which have been building momentum over the last couple of years and are on the precipice of becoming the shining stars in industrial real estate.

In 2021, we launched Hanson Capital Industrial Fund I, which is a $100M private equity fund dedicated exclusively to acquiring industrial investment product and developing “Class A” industrial product. Our affiliate, Hanson Capital GP1, LLC acts as the general partner and has full discretionary authority to deploy the capital raised into the fund as opportunities present themselves, which allows the fund to act quickly and providing assurance of closing, which further enhances our ability to secure the very best opportunities.

In addition, as an affiliate of Hanson Capital, LLC, a state licensed bank that originates hard money and bridge loans and which manages in excess of $25mm at any given time, we are uniquely prepared to work with our lending partners to secure the very best terms and to make their review and underwriting process as easy as possible.

Lastly, our organization’s core principals are to always remain relationship minded and not transactional, and always do what we say we will do. With this focus, we look to develop strategic alliances that produce mutually beneficial results for all involved for years to come

Sponsor Overview

University Drive

1626 & 1646 E University Dr. Phoenix, AZ | Industrial

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