Situated in the San Gabriel Valley, nestled between East Los Angeles and the Inland Empire, Arrow Grand boasts a sizable, well-structured building that is roughly 72,000 square feet on a 3.3-acre site. While its pricing ($236/ft) parallels rates often seen in the Phoenix market, it’s essential to recognize its prime location within the sought-after Southern California region. In addition, our going-in land price is $119/ft, which is comparable to other sites in the market today that are undeveloped. This meets our criteria of being below replacement cost in multiple ways.
The property’s current in-place rent, at $.90 per square foot per month, is approximately 44% below current market rents. The dramatic mark-to-market opportunity positions us well to create value as we bring the in-place rent to market ($1.60/ft) in June of 2024 when the current lease expires. We have estimated just over $1 million for future improvements, including selective interior modifications, a new roof, fresh paint, and essential exterior refurbishments. Once the improvements are completed, we anticipate the property’s annual yield to rise to roughly $1,400,000, which translates to a 7.7% cap rate. Arrow Grand’s strategic location, flanked by two pivotal state highways, combined with an impressively low market vacancy rate of 1.5%, underscores the minimal risks associated with this opportunity. In essence, with its below replacement pricing and clear path to adding value in a flourishing submarket, Arrow Grand is a compelling investment opportunity.
Lastly, we are excited to announce our partnership with an institutional equity partner, AIG / Corebridge Financial, one of the world’s largest insurance companies. They will be contributing roughly $8M of the required equity for this venture. The remaining equity will be contributed by ourselves and our network of friends and family, including you. With a projected internal rate of return of 16.58%, this investment presents both promising returns and a trusted partnership framework, in addition to the best deal we’ve seen in over 12 months.
Despite challenging economic times over the last 18 months, we refused to sacrifice our underwriting guidelines and investment thesis and are now excited to present the first deal that has met those underwriting guidelines and investment thesis.