$105M Off-Market Deal Nets 16 for Faropoint

Faropoint has acquired a 16-building portfolio in key logistics markets Jacksonville, Fla., and Memphis, Tenn., for $105 million, a transaction brokered by Eastdil Secured that was completed in less than 45 days.

This multi-market off-market acquisition totals 1.7 million square feet and features four buildings in Jacksonville and 12 in Memphis.

Faropoint’s chief investment offer, Ohad Porat, told Commercial Property Executive his firm prefers off-market transactions.

“We strongly emphasize off-market acquisitions as a key component of our investment strategy, as these deals often present attractive opportunities due to reduced competition and limited marketing exposure,” he said.

“Our deep industry relationships and ability to close quickly and reliably have made us a preferred buyer for many sellers in off-market situations. Leveraging this approach alongside our data-driven methodology and market expertise, we identify and act on high-value opportunities across the industrial real estate spectrum, providing our investors access to a wide array of opportunities and maximizing value creation potential in this competitive market.”

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Porat stated that, unlike widely marketed deals, Faropoint defines off-market transactions as those where the broker or seller approaches them directly or contacts a select group of buyers known for their ability to close deals swiftly and maintain strong reputations. These properties often lack offering memorandums or other formal marketing materials.

When off-market deals make sense

Off-market deals are preferred in many asset classes.

Jaclyn Anastasakos, realtor at Luxe Properties, told CPE that off-market acquisitions can be a strategic way to grow a portfolio.

“By targeting properties not on the market, you can find unique assets that align with specific investment goals, often at more favorable prices,” she said.

Anthony Bergeman, SIO, executive vice president & principal with DAUM Commercial Real Estate Services, Industrial, told CPE, “Off-market acquisitions are incredibly important at the institutional level because it enables ownership groups to buy and sell assets more quickly and efficiently than they would if they had to list it and promote it publicly.”

“Some entities could be prohibited from listing publicly or don’t want to disrupt their tenants. Speed can be a main factor when trading assets through 1031 exchanges and other investment vehicles with deadlines,” Bergeman said.

According to Bergeman, off-market deals also avoid negative perceptions associated with public listings, such as drops in the price or a high number of days on the market. “For off-market acquisitions to succeed, brokers need deep relationships within their region and the national ownership level.”

Michael Koshet, an off-market multifamily specialist at LAoffmarket.com/KW Commercial, told CPE that since debt markets began tightening 24 months ago, it has been increasingly difficult to fully market specific assets in a broadly marketed process with a major institution.

“Various metrics could throw off a strategic acquisition, causing sellers to receive offers significantly below expectations or BOVs,” Koshet said.

“Most groups competing on a specific deal communicate about market conditions, etc.; in this scenario, word of mouth about what another group is offering could cause a domino effect on other offers.”

He said in an off-market scenario, a seller is in a closed-door negotiating room with a specific buyer who focuses on that subject property, allowing no outside opinions or metrics to affect that negotiating table.

“The seller usually vets the buyer group and vice versa,” he said. “This gives a higher probability of that transaction crossing the finish line, considering both groups hold each other accountable during the transaction period.”

According to Koshet, sellers may have the benefit of directly communicating with the buyer and transacting at a price they feel is acceptable to their investors, while buyers have the benefit of acquiring a deal on a basis they think is acceptable and tailored to their investor return requirements. “Off-market transactions may not always be the norm for some groups, but it is a great option that buyers prefer, and sellers could strategically accomplish a disposition,” he added.

Joe Santaularia, senior vice president & managing partner of Bradford Commercial Real Estate Services/CORFAC International, told CPE that off-market transactions are the best way to get a buyer to commit to a lower price because they don’t leverage the market.

“When working with an investor, a common tactic is sending unsolicited offers to a target market to generate transactions,” he said. “In DFW industrial, the market has been inundated with capital, and much of the low-hanging fruit has been picked, leaving non-institutional products to pick from.”

“With interest rates being at a high point for this cycle, some investors who bought assets before rates skyrocketed are in a crunch and looking for off-market investors to help them from sliding into bankruptcy,” Santaularia added.