Chandler Industrial Conversion | Hanson Capital

Chandler Small-Bay Industrial Conversion

235 S 56th St, Chandler Arizona

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Opportunity Summary

235 S. 56th Street presents a compelling value-add industrial opportunity in one of the Southeast Valley’s most desirable infill corridors. The 105,000 SF distribution facility is being acquired at $119/SF, materially below replacement cost, providing immediate downside protection and flexible exit options. The property benefits from strong freeway access, a dense surrounding population, and proximity to a deep labor pool in a submarket experiencing some of the Valley’s strongest residential growth. Located within a core consumption and last-mile distribution node, the asset is surrounded by established industrial, service, and trade users that support long-term tenant demand fundamentals.

Current vacancy is driven by a temporary oversupply of large-format warehouse space, not by functional or locational obsolescence. This creates a timely opportunity to execute a value-add repositioning into multi-tenant small-bay industrial, unlocking a broader tenant base, faster absorption, and diversified income streams. The attractive acquisition basis enables competitive lease positioning relative to surrounding small-bay inventory while still generating strong returns, combining meaningful upside through redevelopment with durable downside protection. We will also be limiting our risk by completing the acquisition on an all cash basis. By eliminating debt from the equation we remove the single largest driver in limiting cash flow upon stabilization and decreases downside risks by removing debt service exposure and loan covenant pressures.

Minimum Investment $50,000

Key Information

  • Purchase Price: $12.50 Million
  • TI/Leasing Budget: $3.59 Million
  • Equity Required: $17.30 Million
  • Close of Raise: 6/31/26
  • Zoning: I-1
  • Stabilized Cash on Cash - Institutional Class 7.47
  • Stabilized Cash on Cash - Investor Class 5.23
  • IRR: 16.08%
  • Equity Multiple: 1.34
  • Purchase Yield | Stabilized Yield: 0.00 | 8.51
  • Estimated Loan Term: N/A
  • Fixed | Variable Rate: N/A
  • LTC: N/A
  • Estimated Loan Rate: N/A
  • Estimated Hold Period: 2 Years
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Property Details

  • Building Size: 105,000 SF
  • Lot Size: 5.26 Acres
  • Zoning: I-1
  • Market: Phoenix (Chandler) Arizona
  • Freeway Access: US-10 and HWY 202
  • Year Built: 1984
  • Construction Type: Concrete Tilt

Business Plan

Chandler Small-Bay Industrial Conversion

235 S 56th, Chandler AZ 85226

The strategy for 235 S. 56th Street is to acquire the 105,000 SF industrial asset at a deeply discounted, below replacement cost basis and execute a targeted value-add redevelopment to reposition the property from a single-tenant big-box facility into a multi-tenant small-bay industrial center. Capital will be invested in demising the building into multiple functional units with a mix of dock-high and shared grade-level loading, paired with spec office and restroom build-outs, updated LED lighting alongside adding HVAC to 100% of the space providing a desirable well located space to tenants in the market.

Stabilization will be driven through a phased, rolling lease-up strategy that accelerates cash flow while mitigating vacancy risk, ultimately creating a diversified rent roll that reduces reliance on any single tenant or industry. Downside protection is anchored by the below replacement cost acquisition basis, durable infill demand, and the long-term resilience of small-bay industrial product. Together, these factors support a compelling risk-adjusted return profile with multiple exit options, including refinance at stabilization, sale to buyers seeking stabilized infill industrial assets, or holding as required with extremely attractive unlevered cash on cash returns.

Market Analysis

Small-Bay Industrial Outperforming Big Box Distribution

Per Matthews, nearly 90% of recent construction has targeted buildings larger than 100,000 SF, pushing vacancy in this segment to roughly 16% and creating ongoing pressure on rents while Colliers is reporting 6.6% vacancy across the Flex/R&D segment in the SE Valley. This dramatic disparity in vacancy has correlated with quarter over quarter growth in rental rates among the smaller bay segment and translates well to our conversion thesis on 56th st.

The result:
• Institutional capital is concentrated in oversupplied big box product
• Small bay remains structurally undersupplied
• Vacancy is tight
• Tenant demand is diversified and sticky

In a market where 90% of new supply is chasing the top end, small-bay offers the opposite trade: constrained supply, durable demand, and significantly stronger fundamentals.

Location

Chandler Small-Bay Industrial Conversion

235 S 56th St, Chandler AZ 85226

Why 235 S 56th St Makes Sense

  • Clear Upside: Value add through small-bay conversion and lease-up.
  • Below Replacement Cost: Irreplaceable basis of $119/SF
  • Infill Location: Strong SE Valley location
  • Demonstrated Business Plan: We executed a similar business plan on similar bay sizes at our McKemy project in 2025.

Returns Overview

Underwriting Assumptions

  • Replacement Rental Rate: $1.35/SF NNN
  • Vacancy Timing Upon Lease Expiration: 15 months to total lease up
  • Exit Cap Rate: 5.75
  • Sale Price: $285/SF
  • Deal Time Horizon: 2 Year

Partnership Structure

Distributions and Fees

  • Monthly distributions of operating profits
  • 2.0% acquisition fee
  • 1% asset management fee on Equity Raised
  • 1% disposition fee

Institutional Class

  • Preferred Return of 8% on all cash flow until 8% annualized return is realized.
  • 100% of distributions following the satisfaction of the 8% preferred return will be paid to the General Partner as a “Catch Up” until the General Partner has received an amount equal 2.67% of the aggregate distributions
  • Equity partner with 70/30 split of profits beyond satisfying the 8% Preferred Return and General Partner Catch Up. General Partner will receive a 30% carried interest in the net profits, with the remaining 70% of net profits to be distributed to the Limited Partners
  • Waterfall structure as follows:
  • Investor Preferred Return – 8%
  • General Partner Catch up – 2.67%
  • Pre 13% IRR Hurdle Investor/General Partner Distribution Ratio – 70/30 split
  • Post 13% IRR hurdle Investor/General Partner Distribution Ratio – 60/40 split

Investor Class

  • Equity partner with 70/30 split of profits. General Partner will receive a 30% carried interest in the net profits, with the remaining 70% of net profits to be distributed to the Limited Partners
  • Waterfall structure as follows:
  • Pre 13% IRR Hurdle Investor/General Partner Distribution Ratio – 70/30 split
  • Post 13% IRR hurdle Investor/General Partner Distribution Ratio – 60/40 split

Company Overview

Chandler Small-Bay Industrial Conversion

235 s 56th St, Chandler AZ 85226

At Hanson Capital Group, experience is not just a metric—it’s our foundation. Boasting over 100 years of combined expertise in real estate, we’ve cultivated a reputation for excellence and strategic insight in the market. Our formidable investments, nearing $350,000,000 under management, are a testament to our sustained success. Driving our vision forward is a harmonized team of executives and directors. CEO Chris Hanson, COO Zach Price, Managing Director of Acquisitions Chris Pike, and Managing Director of Asset Management Jim Tainter lead the charge. Together, they craft the trajectory for Hanson Capital Group, ensuring we remain at the forefront of the real estate industry.

Established in 2008, Hanson Capital Group embarked on its mission to become a trusted auction bidding service provider and create a lasting enterprise focused on creating wealth for ourselves and our partners. Aligning with prominent institutions, our dedication and energy quickly became evident, resulting in the acquisition of over 1,500 single-family homes out of foreclosure within an impressive six-year span. However, our sights were set higher. Identifying a unique opportunity to elevate our bidding pursuits, Hanson Capital, LLC was established in 2010 as a state-licensed mortgage bank. Today, Hanson Capital thrives as a leading hard money and bridge debt lender, and, to date, has overseen transactions exceeding $500 million, while consistently maintaining an equity portfolio averaging $40 million.

While our initial investments were rooted in real estate backed lending, in 2010 we began our pursuit of direct investment in value-add multifamily assets. After nearly a decade of that value-add multifamily strategy, and after buying and selling a few thousand apartment doors, our focus shifted in 2018 towards industrial real estate, which continues to be the focus today.

We are now deeply entrenched in industrial real estate within the so-called “Sun Belt”, with a notable presence in strategic areas like California, Arizona, and Texas. The result of this commitment is roughly $350,000,000 in assets under management and over 1.6 million square feet.

Our process is invaluable to our success. All investment decisions are made by our investment committee in accordance with our Investment Policy Statement (IPS). Strategically crafted, the IPS emphasizes our central mission: capitalizing on inefficiencies in real estate to provide sustainable returns through proven and disciplined investment and management strategies. Every facet of the IPS has been intricately designed to demystify our methodologies, underscoring our commitment to transparency, accountability, and the responsible management of entrusted capital. The IPS also guides us in making informed, consistent decisions, helping to mitigate risks, and optimize returns, while ensuring that our actions align with our long-term investment objectives.

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Chris Hanson

Founder

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