Regal Ventures Explores Unorthodox Industrial-Condo Strategy
The company is using its experience and lack of supply to its advantage.
When you think of mixed-use properties that have the potential to boom – you think of spaces that are amenity-rich to drive interest from consumers. Usually, that’s office developments surrounded by various entertainment or multifamily with retail. However, Regal Ventures is testing a bit of an unorthodox strategy by teaming up with BenchmarkReal Estate to acquire an industrial site that includes condos.
The 218,410-square-foot property, called Crownwood Industrial Estates, is located in Bristol PA, and features three buildings. One of which takes up 112,348 square feet of space and was described by Regal in a statement as an “industrial-sector variant of a condo ownership structure.” Additionally, there is a 100,170-square-foot development site in the works in the Cronwood portfolio purchased.
But there are a couple of reasons in particular why the investment manager decided to pull the trigger on Cronwood.
EXPERIENCE WITH ASSETS
For one, Regal is relying on its experience and knowledge of working with condo assets. Earlier this year, the New York-based firm acquired a nearly 38,000-square-foot retail condo site in West Holywood, California. And in 2022, it purchased another 37,165-square-foot retail condo in Manhattan, which features 253 units, for $35.25 million.
Considering that, Sean Dainese, managing partner of Regal believes that a property with a condo structure alone is “advantageous” to the company.
“I think in a situation like this of creating that condo association ended up having a lot of benefits for us as ownership,” he told GlobeSt.
“Our familiarity with just being a part of condo associations and understanding the structure and how expenses flow through from the condo to unit owners and everything makes us comfortable.”
Plus, Regal isn’t a neophyte to industrial either. Currently, the firm has $32 million worth of properties under management for the asset class.
SUPPLY CONSTRAINED PRODUCT
Another thing Dainese pointed to was the industrial opportunity, although that particular asset class isn’t dominated in its portfolio like condos and retail. He has been noticing there’s been a lot of supply in the national market – but not necessarily in Bristol and especially for industrial assets as small as 100,000 square feet or less. Regal said that Crownwood features “small bay flash/flex” industrial buildings.
“We saw the dynamic with this property in particular, of what is hidden, a little bit under the industrial umbrella as really a supply-constrained product,” Dainese said.
“There’s strong demand in this Philadelphia industrial market for this type of space.”
On the site, Dainese said there is one condo in each of the buildings, with one of them getting sold at a premium to an existing tenant. Another unit is for the land site.
While not as common in CRE, a condo industrial site with 24 residential units, developed by California Commercial Investment Cos., hit the market this summer in Oxnard, according to a report from the Ventura County Star. Of the units, 11 were pre-sold.
FUTURE ACQUISITION PLANS
Regal is open to acquiring another industrial condo site in the future.
“Having gone through this experience in an industrial product like this is, I think we see it as a real, value add that we can bring an institute like we did here,” Dainese said.
When looking for acquisitions on the industrial side, he added that the retail-focused firm will continue to look for small bay spaces.
Dainese also weighed a few other elements that will play a key role in Regal’s decision-making on the buying front: “Does this site have multiple buildings on it? Are there meaningful differences to the asset type that really exist here? Can we create this condo and create value by doing it?”
TRENDS ARE HEADING THE RIGHT WAY
But of course, there are a lot of uncertainties and hesitancy in CRE in general, with the upcoming election and where interest rates will wind up.
From a retail sector perspective, Dainese hasn’t been noticing a significant tick-up in transitions. However, that could soon change thanks to the Federal Reserve cutting interest rates by 50 basis points in September.
“It does feel like we’re trending towards a pickup in velocity and in my eyes, a lot of that commentary comes from what we look at in retail,” a bullish Dainese noted.
“We’re not seeing necessarily a huge change in pricing, but it does seem like the overall sentiment is more positive.”