As part of our broader strategy to opportunistically acquire high quality properties during the current downturn, we’ve closed on an approx. 400,000 square foot Class-A industrial property in Las Vegas, Nevada, for a purchase price of roughly $80.2 million. The property is conveniently located just 15 minutes from downtown Las Vegas, 20 minutes from the city’s central hotel and casino district, and immediately adjacent to I-15, providing access to major transportation arteries that lead to key markets in the western United States, such as Los Angeles, Denver, Phoenix, and Salt Lake City.
As demand for more and faster delivery continues to grow, we believe that “last-mile” distribution facilities located close to major population centers will become increasingly important for retailers.
This acquisition was made by a joint venture between two Fundrise sponsored funds. Including budgeting for renovations, soft costs, and other fees, the Flagship Fund invested roughly $39.7 million, and the East Coast eREIT invested roughly $4.4 million, bringing our total projected equity commitment to roughly $44 million.
Strategy
Value Add
Acquire real estate that needs improvements and / or lease-up
- Risk-return profile: Moderate to high
- Expected timing / delay of returns: Several months to a year
- Expected source of returns: Growth with some income
Note that this section is intended to provide a general overview of the Value Add strategy for educational purposes only, and is not meant to be representative of the specific details of any individual investment. All investments involve risk and there are no guarantees of any returns.
Business plan
The newly constructed Class-A building is located within the North Las Vegas submarket, the premier logistics hub for the region, and is well-suited for a variety of industrial applications, including as a last-mile distribution facility. Within the North Las Vegas submarket, industrial occupancy has been consistently very high in recent years, as demand for industrial properties has consistently outpaced supply, even with a considerable pipeline of new construction; average year-over-year rent growth has increased as much as 15% across the asset class in recent years. As the broader Las Vegas MSA grows, the businesses based there require efficient distribution systems, which are serviced by properties like this one.
A last-mile distribution center, also referred to as a terminal building or sorting center, acts as a handoff point to connect 18-wheeler trucks, which typically carry goods in bulk across longer distances, with the smaller vehicles that make the final leg of the journey to drop off packages at individual homes and businesses. The cross-dock configuration and high ceilings of this property makes it an ideal fit for industrial tenants and an attractive option for businesses looking to expand, further contributing to the high demand we've already seen.
At the time of our acquisition, the property was already 100% occupied by a business tenant specializing in e-commerce order fulfillment for a wide variety of major, national clients and delivery channels. We plan to hold and manage the property over the long-term with the goal of earning regular rental income, and then eventually selling the property at a profit.
An opportunistic acquisition strategy taking advantage of market adversity
As we’ve communicated most recently in our 2023 mid-year letter and article about the broader credit environment, we believe the current volatility in financial markets represents a rare buying opportunity for long-term investors. While challenging to navigate, economic downturns often create unique windows in which to acquire properties at exceptional pricing. It’s these periods, when other market players are on the defensive or even distressed, that we believe are the best time to buy.
Why we invested
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Prime location: Fifteen to twenty minutes from Las Vegas’ largest commerce centers, and immediately adjacent to major transportation arteries leading to key markets in the western United States, the property is well-positioned to serve as a distribution center for businesses across the metropolitan area.
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Healthy local economy: In 2022, the Las Vegas area’s population grew by 1.8%, a much faster rate than the national average of 0.4%, and is expected to see steady increases in new jobs for decades to come, as healthcare and social assistance are projected to become the area’s largest employment sectors in 2025, following those famously powered by Vegas’ tourism industry: food services and accommodations.
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High-demand property type: In order to efficiently distribute goods across major metropolitan areas, companies ranging from online grocery delivery to e-commerce retailers need space in highly specific locations with access to regional transportation. While Las Vegas currently has a pipeline of new industrial construction, many of those upcoming properties will be too small or suboptimally located to fulfill the last-mile delivery function demanded by e-commerce businesses today — a role for which this property is ideally suited. With an economy enjoying job growth across nearly all employment sectors, the Las Vegas region has seen remarkable tenant demand and pre-leasing rates for industrial facilities, according to a recent CBRE industrial report.
As always, if you have any questions or feedback, please visit our help center or reach out to us at investments@fundrise.com.
Additional Information: An investor in the Fundrise Real Estate Interval Fund (the “Flagship Fund”) should consider the investment objectives, risks, and charges and expenses of the Flagship Fund carefully before investing. The Flagship Fund’s prospectus contains this and other information about the Flagship Fund and may be obtained here. Investors should read the prospectus carefully before investing.
