This week we sat down with Chief Executive Officer of Avistone, LLC, Richard Kent, to find out why industrial real estate assets are the focus of their investment strategy. Check out their latest offering for Avistone Presidents, LLC.
The following are solely the opinions of Mr. Kent and do not constitute financial advice or counsel from RealCrowd. All investments involve risk. As always, please consult your investment advisor prior to making any investment decisions and carefully read the risk disclosures and forward looking statements in the Private Placement Memorandum for the applicable transaction prior to investing. This does not constitute an offer for the sale of any securities.
Avistone, LLC focuses exclusively on the multi-tenant industrial real estate sector. Compared to other types of real estate – or even to other types of equity investments – Avistone, LLC believes industrial real estate offers investors a number of potential competitive advantages.
- Attractive Risk/Return: Avistone is the first to admit: industrial real estate is not the sexiest type of investment – no soaring glass towers, jazzy store fronts, hip mixed-use or classy apartments. That is exactly the point: Avistone, LLC believes that, historically, industrial real estate has exhibited less wide swings in market value as opposed to other property types during times of economic weakness.
- Ease of Management: Industrial real estate is primarily leased on a triple net basis where the tenant pays its share of the property operating expenses and most of its interior maintenance costs. Additionally, industrial tenants generally do not require interior janitorial service and industrial properties rarely include interior common areas that need to be maintained by the landlord.
- Lower Cost of Ownership: Industrial real estate is primarily leased on a triple net basis where the tenant pays its share of the property operating expenses and most of its interior maintenance costs. Additionally, industrial tenants generally do not require interior janitorial service and industrial properties rarely include interior common areas that need to be maintained by the landlord.
- Industrial RE Is Flexible: Industrial properties come in a variety of shapes and sizes. There can be warehouse with little office, or space that’s heavy on office with some warehouse for distribution, warehouse area can be converted into biotech space or a baking facility… and so on. Given proper zoning, industrial real estate allows for far greater flexibility in accommodating tenants’ needs than other commercial property types.
- Industrial RE Supply Is Shrinking: Avistone, LLC believes that we are seeing an urbanization renaissance in the United States. Dilapidated industrial buildings are being turned into hip night clubs, chic lofts, apartments and “collaborative space” offices. At the same time, very little new industrial construction is occurring in the urban and suburban areas. As former industrial areas are being rezoned, there is less room for suppliers and distributors to access and store their inventories. From an investor’s supply/demand perspective, this means that industrial has the potential to become more valuable in these areas as businesses prefer to be closer to the cities they supply.
- High Replacement Cost / Barriers-To-Entry: Which brings us to the primary expense driver of new industrial projects: the high cost of acquiring and entitling land. While industrial properties are typically single-story and not necessarily expensive to build, they do require far larger sites of land as opposed to vertical projects such as office, multifamily and hospitality. Generally speaking, developing new industrial sites does not offer municipalities the same tax revenue opportunities as retail, hospitality, housing or high-rise office. Thus, Avistone, LLC believes that the increasing demand for industrial space and the high cost of building new projects potentially places upward pressure on rental rates on existing projects, which may increase opportunities for appreciation in existing properties, especially those acquired below replacement cost.
- Changing Nature of US Employment Market: Today, according to Small Business Association, 40% to 50% of all job growth in the country is driven by businesses with fewer than 50 employees, and this trend is expected to increase over the foreseeable future. Avistone LLC believes many of these businesses will seek to expand space they already occupy in multi-tenant industrial projects and business parks.
- Growth of Internet Retail: According to the National Association of Industrial and Office Park Owners (NAIOP), e-commerce (product warehousing for shipping) now drives 30% to 40% of the industrial real estate business. As one of the fastest growing segments of the economy, ecommerce is expected to account for one-third of all retail sales in just 15 years; and shift more and more space from expensive brick and mortar retail stores to industrial properties – primarily warehouses and e-commerce fulfillment centers.
- The Coming Revolution in 3D Printing: Forbes Magazine, The Economist and other leading business publications are calling 3D Printing “The Next Industrial Revolution.” Because most practical applications will extend beyond “home-use,” the explosive growth in this industry over the next 10-years will house itself primarily in industrial properties. Along with that, Avistone LLC believes the widely reported coming growth in industrial robotic manufacturing and assembly will directly impact industrial properties.
- Home Building and Infrastructure Construction: Industrial properties are often home to businesses engaged in the construction industry. As a result, Avistone LLC believes expanded activities in new residential/commercial construction, the oil and gas industry, and renovation of the nation’s aging infrastructure of roads, bridges and utilities will have a positive impact on industrial properties. Specifically, Avistone LLC targets industrial projects in regional markets exhibiting these strong economic drivers.
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Avistone, LLC, is a real estate investment firm specializing in the purchase of multi-tenant industrial / business park properties and creating alternative investments for individual investors seeking high current yield, strong returns and the mitigation of risk. We target individual properties that have the potential of providing our clients with current cash-on-cash distributions and the potential for appreciation over 5-year holding periods.