CapRock Closes $250M Industrial Value-Add Fund

Image by M.B.M. via Unsplash

In yet another sign of the industrial sector’s lofty status among commercial real estate investors, CapRock Partners, of Newport Beach, Calif., has conducted the final close of its CapRock Partners Industrial Value-Add Fund III at its hard cap of $250 million.  

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The fund was oversubscribed, exceeding its original target of $200 million and attracting additional co-investment commitments in a total amount that was undisclosed.

Industrial Value-Add Fund III is CapRock’s fifth fund overall and reportedly includes commitments from U.S.-based institutional investors including pension funds, endowments and fund of funds, as well as high-net-worth investors and family offices.

CapRock President Jon Pharris noted in a prepared statement that although the first wave of COVID-19 hit the nation—and rocked the commercial real estate sector—in February, just as CapRock held its initial close on this fund, the pandemic “resulted in increased investor demand for the industrial sector.”

“This fund will continue our investment strategy of acquiring unique middle market value-add industrial investment opportunities,” he added.

More specifically, CapRock Partners Industrial Value-Add Fund III focuses on acquiring value-add industrial properties of about 100,000 to 400,000 square feet, typically $20 million to $50 million per acquisition, across key West Coast port markets.

These properties are typically Class A and B industrial assets with short-term leases or vacancies, or that have excess land, offer re-entitlement opportunities, have below-market rents or are under-managed or undercapitalized, a CapRock spokesperson told Commercial Property Executive.

Including co-investment commitments, the fund will enable CapRock to acquire roughly $800 million to $1 billion of industrial assets in the next couple years in its primary markets of California, Nevada and Arizona, as well as in secondary industrial markets across Utah and the Pacific Northwest.

In fact, about one-third of the fund has already been allocated, CapRock Partners having acquired or being in escrow to acquire a total of 14 value-add properties totaling more than 2.3 million square feet throughout Southern California, metro Phoenix and the Greater Las Vegas basin.

4615 W. McDowell Road, Phoenix. Image courtesy of CapRock Partners

One recent acquisition, the spokesperson told CPE, was 4200 W. Valley Blvd. in Pomona, Calif. This 230,000-square-foot infill industrial property on an approximately 12.5-acre site in the tight San Gabriel Valley market was a sale-leaseback with an owner-tenant in the fourth quarter. On expiration of the leaseback, CapRock intends to demolish the building and develop a new 270,000-square-foot property with 36-foot clear ceiling height.

In an off-market transaction in the early summer of 2020, CapRock Partners also acquired 4615 W. McDowell Road, a 146,500-square-foot building that can accommodate up to four light manufacturing or distribution tenants in Phoenix.

Edgeline Capital Partners advised CapRock as its exclusive capital placement agent on the Industrial Value-Add Fund III fund-raise.

CapRock did not reply to CPE’s request for additional information.

Both buying and developing 

CapRock held the second closing of Industrial Value-Add Fund III in May 2020, at which time it had accumulated investments totaling more than $180 million.

On the development side of things, last December CapRock, in partnership with ARES Management, broke ground on CapRock Tropical Logistics, a 1.1-million-square-foot, two-building industrial development in Las Vegas. The larger of the project’s buildings is an 857,060-square-foot warehouse that was then already preleased to an e-commerce company. The development was funded by a $134.6 million loan from Mesa West Capital.

In all, this year CapRock reportedly will have more than 7 million square feet of industrial space under construction across the Western U.S., including multiple facilities of more than 1 million square feet each in California, Nevada and Arizona.