Remaining Competitive in Infill Markets
By Carrie Rossenfeld
Published: August 18, 2017
IRVINE, CA—Being aggressive, moving quickly and knowing the details behind what’s driving values in a market are a few key traits to succeeding in the highly competitive infill-market arena, CapRock Partners’ VP of acquisitions Taylor Arnett tells GlobeSt.com. Arnett was recently promoted to this position after joining the firm as acquisitions manager in 2014.
During his tenure, Arnett has successfully sourced and closed a sizable number of acquisitions within California and Nevada. We spoke with him about why infill markets are so popular now and what is necessary to make them successful.
GlobeSt.com: With infill markets being so popular for both acquisitions and development, how can developers and owners remain competitive?
Arnett: Obviously, you need to be aggressive and move quickly in these markets. If you see a good opportunity, jump on it. At CapRock, we try to be experts in the local markets and really know the details behind what’s driving values and where opportunities lie that other investors/developers may not see. In these situations, we are very comfortable being aggressive and taking calculated risks. It is also important to be disciplined and persistent. Sometimes we may not be the initial buyer, but we stay connected to the owner/broker and “hang around the hoop” so that if the first buyer has a challenge, we will be the next call.
GlobeSt.com: What key factors make infill developments successful?
Arnett: Site planning is extremely important since every square footage of coverage counts and helps you push your land-acquisition price. That being said, you need to be careful not to design a building that lacks functionality in the submarket. Again, this is where the details of the submarket are extremely important to understand. Site plans that work in Central L.A. may not work in the San Gabriel Valley, and you have to know the difference.
GlobeSt.com: What should owners and developers avoid in these markets?
Arnett: Underestimating environmental issues. Many of the properties in infill markets are contaminated, and any developer needs to understand both the path to remediation and correctly quantify the cost and time associated with that path. If you are IRR driven, elongated remediation time (let along increased costs) will be a deal killer, but if you have a longer time horizon and are more concerned with a return on cost metric, you can likely take a little more environmental risk if the acquisition price is discounted.
GlobeSt.com: What else should our readers know about this topic?
Arnett: Brokerage relationships are the most important part of succeeding in the infill markets. We are admittedly a younger company with a great opportunity to continue on with the same leadership for the next 30-plus years, so we go out of our way to foster brokerage relationships—not just for the short term, but for the long term. Brokers see opportunities first, and my goal is to be the developer/investor to whom they bring those opportunities first because they know CapRock will perform.
Sometimes we may not be the initial buyer, but we stay connected to the owner/broker and ‘hang around the hoop’ so that if the first buyer has a challenge, we will be the next call.
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