Property Biz Canada
If you call Sean Dalfen asking about some deals that his company recently announced, there is a good chance that he has just signed off on another that he hasn’t gotten around to announcing yet.That’s exactly what happened this week with a call to Dallas-based Dalfen America Corp., a company with its roots in Quebec about a slate of divestitures announced this month.
“We actually just acquired a large portfolio from GLP, Global Logistics Properties,” said Dalfen’s President, kicking off a phone conversation.The deal for a still-undisclosed price is for a portfolio of five industrial properties totaling 1.2 million square feet in Reno, Nevada.
Betting on Reno
For Dalfen, which has properties scattered across the U.S., it is the first foray into Reno. The city has emerged as a well-located transportation hub in the western part of the country thanks to being just 20 minutes from the California border and a relatively short three hour drive to San Francisco.
Reno “has become a key western distribution hub for a myriad of different reasons,” explain the company’s chief executive, which includes the ability to bypass much of the traffic congestion up and down the U.S. west coast.
Nevada also has a big wage advantage over California.
“That equates to a really heavy amount of money for any ecommerce focused distribution company or fulfillment or logistics or anything of that nature. So a lot of very large companies including Amazon, Starbucks, Petco and just countless others, including Tesla actually.” The carmaker has tapped Reno for its enormous Gigafactory 1 lithium battery factory.
Up in the air
From the air, Reno appears to have plenty of room for growth but it is surrounded by mountainous terrain and also hemmed in by flood plains.
“We did a lot of research before we acquired these assets,” explained Dalfen. “When you do an aerial you see lots of dirt and you assume you can build there because there is a lot of raw land.”
Tesla had to journey 20 minutes outside of Reno to build its factory as did Amazon to build its second facility there, he said.
There is no land available for new builds where Dalfen’s new properties are located where “you are not in Reno’s notorious flood zone. Reno has a 50 and 100-year flood zone that seems to flood every 10 years.”
Major tenants include third-party logistics giant Ozburn Hessey Logistics (which services Red Bull and Apple among others out of the Reno locations) and OnTrac which provides next day delivery. “Ozburn is the largest tenant, they are the bulk of the portfolio.”
The five properties in the Reno-Sparks Metro area were built around 1990 with the exception of one a decade older. “They are all modern distribution facilities.”
A cautious approach
Because Dalfen has never owned property in the Reno area, it not only did a ton of research, it bought less property than it could have.
“We like to walk before we run, and so this portfolio that we acquired actually came out of a larger portfolio.”
Overall, it was a 2.5 million to 3 million sq. ft. industrial portfolio.
“I made the decision that we were only comfortable in acquiring what we thought were the best assets in the bunch. The others might be good for other people, but for our focus on fulfillment and the ecommerce industry these were the ones that made the most sense for us.”
The Dallas-based company announced it has sold more than US$100 million in properties across five states. The assets, which totaled more than 1.1 million sq. ft., include Dominion Plaza in Dallas,; Sharyland II in McAllen, Tx; Ameriplex in Indianapolis, Indiana; Fountain Oaks in Tampa, Florida; and a nine-building industrial portfolio with properties throughout the Carolinas.
The company’s President said two of the properties were sold to end users while the other three were purchased by investors.
Dalfen has been busy acquiring this year as well, snapping up more than US$200 million in properties in the U.S.
It is not done, either. The company is closing on acquisitions in Cincinnati and Minneapolis and in the midst of a major project at the Dallas Fort Worth airport, he added.
He also noted that a real estate analytics firm identified Dalfen as one of the largest industrial property buyers in the U.S. and one of the top five foreign equity players.
First place national award in the U.S.
As if that was not enough, in July the company was named the country’s top “Real Estate Investor Operating Company” in 2016 by National Real Estate Investor (NREI). The award was announced during IMN’s annual U.S. Opportunity Funds Forum in New York, which is the largest private equity real estate conference in the country. The award recognizes the top performing firms that have significantly contributed to the commercial real estate industry over the past year.
Dalfen noted that the award “highlights the success we have generated through building a best-in-class, vertically integrated platform. We believe that real estate is an on the ground business where value creation is derived through hands-on operations.”