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THE PROPERTY

A 16-Unit, 36,450 SF Multi-Tenant Light Industrial Park in Escondido, California: 90% Leased at Acquisition with a Long-Term Tenant Base and a Defined Value-Add Runway

The property at 1310-1344 Industrial Ave. in Escondido, California is a multi-tenant light industrial park totaling approximately 36,450 square feet across 16 units. The park consists of two parallel single-story buildings of brick and concrete masonry construction, each oriented along the drive aisle that runs between them, with roll-up loading doors, glass-front unit entries, and ample surface parking at the front and rear of the park. At the time of acquisition, the property was 90% leased, with tenants representing approximately 70% of the rentable space having occupied their units for at least five years. The stability of the existing rent roll, combined with the near-term lease expiration schedule, defined the investment thesis: the property offered a reliable income foundation at acquisition while positioning the new owner to recapture and re-lease every unit to market rents within the first two years of ownership.

The condition of the property at acquisition reflected the deferred maintenance typical of long-term private ownership. The physical plant, including roofing systems, asphalt, lighting, and HVAC, required capital investment before the property could be broadly marketed to replacement tenants at market rates. The property was originally put under contract for $7,200,000 and subsequently amended with a $130,000 seller credit to account for these conditions, with the final purchase price of $7,070,000 reflecting the as-is state of the asset. One of the principal owners of the seller group had recently passed, driving the disposition and providing the acquiring sponsor with an off-market basis in an established submarket.

THE RRA SOLUTION

$5,066,000 First-Position Acquisition Loan with a Capital Expenditure, Tenant Improvement, and Leasing Commission Holdback Structured Around Eight Draws

RRA provided a $5,066,000 first-position bridge loan closing May 6, 2025, structured to fund the acquisition and finance a phased capital program tied to leasing activity. The loan included $4,242,000 of initial funding at closing, with the remaining $664,736 held back in a structured reserve for capital expenditures, tenant improvements, and leasing commissions, to be advanced in tranches as the sponsor completed work and executed leases.

The holdback was deployed across eight draws over the life of the loan, following the progression of the business plan. Early draws funded the capital program: roofing repairs, asphalt resurfacing, lighting upgrades, HVAC replacements, and individual unit turn work as leases expired. Later draws shifted to cosmetic and exterior improvements and to the leasing commission budget as the sponsor executed new leases and renewals in the second half of 2025. The loan paid off in full on September 22, 2026, approximately 16 months after origination, through a sale of the property.

THE BUSINESS PLAN

Light Value-Add Execution: Mark Rents to Market as Leases Roll, Renovate Vacated Units, and Re-Lease on Long-Term NNN Terms

The sponsor's business plan was straightforward and deliberately structured around the property's lease maturity schedule. All in-place leases at acquisition were set to expire by January 31, 2026, creating a defined window in which the sponsor could systematically mark rents to market across the entire rent roll without requiring a long holding period or a tenant-by-tenant negotiation over multiple years. For tenants who chose to renew, the sponsor's goal was to convert gross leases to long-term, triple-net structures at market rates. For units that vacated, the plan called for completing interior renovations before broadly marketing those spaces.

The lease-up was active in the second half of 2025, with a batch of new leases and renewals executed at market rents. One notable setback came when the property's second-largest tenant, occupying units 1322 and 1324B, elected not to renew and vacated at year-end December 31, 2025. Combined with free rent periods on some of the newly executed leases, the departure compressed January 2026 rental income. By March 1, 2026, the property was 79% leased with 13 of 16 units occupied, and the remaining three vacant units were refilled through mid-2026. The sponsor completed the capital program across eight draws, maintained the property's physical plant and curb appeal through the transition, and positioned the asset for a successful sale. The loan retired in full through the sale proceeds on September 22, 2026.

THE SUBMARKET

Escondido, California: A Supply-Constrained San Diego County Industrial Submarket with Low Vacancy and Consistent Rent Growth

The property is located in Escondido, California, in northern San Diego County, within a well-established light industrial submarket positioned along Interstate 15 and California Route 78. Escondido serves as a commercial and distribution hub for the North County San Diego region, benefiting from access to the broader San Diego metro while maintaining a lower cost basis than coastal industrial submarkets. The immediate area around 1310-1344 Industrial Ave. is an established industrial corridor occupied by a mix of small-bay multi-tenant users, light manufacturing, trade contractor businesses, and service providers, creating stable and diversified demand for the type of space the property offers.

At the time of loan origination, the Escondido industrial submarket carried an average vacancy rate of approximately 4.3%, reflecting tight supply conditions consistent with the broader San Diego County industrial market. Year-over-year rent growth in the submarket was approximately 2.5%, supporting the thesis that rents achievable on new and renewing leases would meaningfully exceed the below-market rents embedded in the property's existing tenancy. The combination of constrained vacancy, positive rent growth, and a tenant base primarily composed of locally rooted businesses with long occupancy histories at the subject property provided a durable underwriting foundation for the acquisition and value-add program.

THE SPONSOR

An Experienced Southern California Industrial Operator with an Established Track Record in the Escondido and San Marcos Submarket

The sponsor is an experienced Southern California real estate operator and developer focused on the acquisition, development, and asset management of office and industrial properties. The firm operates as a full-service platform, combining direct ownership with third-party asset management capabilities, and has been active in the Greater Southern California industrial marketplace across multiple market cycles. At the time of this acquisition, the sponsor brought direct submarket familiarity, including experience with a comparable multi-tenant industrial property at 1320 Grand Ave. in the nearby San Marcos submarket, providing a relevant analog for the leasing and operational execution required at 1310-1344 Industrial Ave.

The sponsor sourced the acquisition through existing broker relationships at Lee & Associates and structured the transaction to take advantage of the seller's motivated disposition timeline. The off-market basis, combined with the seller credit negotiated to reflect physical plant conditions, positioned the sponsor to execute the value-add plan from a favorable cost basis. The sponsor's familiarity with the submarket's tenant profile and leasing dynamics directly informed both the capital allocation decisions and the sequencing of the lease-up program, contributing to a full payoff of the RRA loan within 16 months of origination.